Bloomberg News

Rusal Sees $120 Million Savings in Debt Costs After Refinancing

September 15, 2011

Sept. 15 (Bloomberg) -- United Co. Rusal expects to save about $120 million in interest payments after completing debt refinancing talks this month, Deputy Chief Executive Officer Oleg Mukhamedshin said.

Rusal, the world’s biggest aluminum maker, is “on track” to complete debt refinancing with all its lenders by the end of September, which will cut the overall debt cost, Mukhamedshin said today in an interview with Linzie Janis on Bloomberg Television’s “Countdown.”

“The overall cost of our debt post refinancing will be slightly above 4 percent per annum,” Mukhamedshin said. “And we expect about $120 million of savings on the interest rate in the next 12 months.”

Rusal in 2009 undertook Russia’s biggest corporate debt restructuring as the global crash in commodity prices coincided with the company’s increased borrowing to finance expansion. Rusal is now refinancing the debt as its earnings improve. Net debt dropped to $11.4 billion as of June 30, compared with $12.2 billion a year earlier and almost $17 billion in 2008.

Rusal last month hired banks including BNP Paribas SA and ING Groep NV to arrange a $4.75 billion loan to refinance debt to international lenders. The amount may be increased to no more than $5 billion, Rusal said Aug. 29.

The loan will be split into two tranches of as much as $4.25 billion and as much as $1 billion. The rate will be no more than 285 basis points above the three-month London interbank offered rate on the first tranche and fixed at 3.85 percent for the second, Rusal’s interim report shows.

OAO Sberbank, Russia’s largest lender, agreed to refinance $460 million of debt for 4.5 percent above the one-year London interbank offered rate, Rusal said in a presentation last month. A $655 million loan with OAO Gazprombank will have interest of 4.5 percent above three-month Libor. Both loans will mature in 2016, according to the presentation.

Talks with VTB Group, Russia’s second-largest bank, are at an “advanced stage,” Mukhamedshin said last month.

--With assistance by Linzie Janis in London. Editors: John Viljoen, Amanda Jordan

To contact the reporters on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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