United Company RusAl will delay its $2 billion share flotation to 2010 after the Hong Kong bourse asked the world’s top aluminum maker to meet conditions before its main owner can tap the market to service debts.
The delay puts Oleg Deripaska and RusAl’s IPO plans on the back foot once more after a breakthrough last week when it clinched a landmark $17 billion debt restructuring deal with creditors.
Support from the Russian state, which confirmed on Monday that it was prepared to buy about a third of the IPO in which RusAl would list 10 percent of its stock, did not persuade the Chinese bourse to give the final nod.
“Based on the company-provided information, the listing committee has not approved the deal … until the firm can fulfill some conditions,” said a source close to the deal.
He declined to say what the conditions were, but said they would not be easy to solve in a few days.
RusAl, controlled by Deripaska, wants to float to pay down more of its debt pile, which it built up in a borrowing spree ahead of a collapse in aluminum prices last year.
The delay is the latest setback for IPO plans by a company in Europe, where the market for company flotations remains lackluster compared with some other regions. Earlier this month, German builder Hochtief pulled the IPO of its concessions unit, though some IPOs have succeeded.
A source with direct knowledge of the matter said RusAl continued its dialogue with the Hong Kong Stock Exchange but could not say when it would meet the bourse again.
“RusAl is not in a rush to do an IPO this year given that the situation on the aluminum market is improving considerably, providing better terms for valuation and pricing,” the source said, adding that the IPO could take place in the first quarter.
Deripaska, once ranked Russia’s richest man, built RusAl into the world’s largest aluminum producer before the economic crisis wiped 60 percent off the value of the metal and left the company struggling to service its debts.
Svetlana Borodina, head of Russia and CIS corporate governance ratings at Standard & Poor’s, said investors could view key risks for RusAl’s IPO as including the long-term volatility in aluminum prices, the complex structure of Deripaska’s Basic Element investment vehicle and a legal suit against him in London.
Michael Cherney, a former associate of Deripaska, is suing him for £2 billion ($3.3 billion) in damages in the British High Court — an action that the judge has described as having a reasonable prospect of success.
“Investors like hedge funds are often looking not only at fundamentals but also on news around the company. Emotionally that [Cherney] suit could have an impact,” Borodina said. “It is a question of discount and reputation.”
Vneshekonombank head Vladimir Dmitriyev said Monday that it could have up to $670 million to spend on RusAl’s share offering and played down legal risks from the Cherney case.
Had the listing been approved, the IPO roadshow would have begun on Tuesday. Analysts have said any further delay would likely postpone the IPO into March because of Russian holidays in January.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Remind me later.