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. Last Updated: 07/27/2016

VEB Seeks ‘Long-Term’ RusAl Stake

VedomostiKudrin speaking during a Vedomosti financial forum Wednesday in Moscow.

Vneshekonombank will buy a 3 percent stake in United Company RusAl’s upcoming IPO and plans to remain a shareholder in the company for at least three years, Finance Minister Alexei Kudrin, who sits on the state bank’s supervisory board, said Wednesday.

“I’m not a fan of wasting the state’s resources on various companies, but this deal is a quality one,” Kudrin told a financial forum in Moscow. “It’s taking a stake in the company, a long-term investment for at least three years.”

Prime Minister Vladimir Putin led a meeting of VEB’s supervisory board last week to consider a possible investment in the aluminum giant’s highly anticipated listing, but VEB chief Vladimir Dmitriyev only said, “certain decisions” were made.

The heavily indebted RusAl is hoping to use its earnings from the IPO to help pay down debt, but analysts say the company will need to conclude long-running restructuring talks with creditors to have a successful share sale.

RusAl chairman Viktor Vekselberg said last week that the company would be able to sell shares in Hong Kong in the first half of December, and that it had a Nov. 26 deadline to restructure $16.8 billion with more than 70 banks.

The company, majority owned by chief executive Oleg Deripaska, received a $4.5 billion loan from VEB last year to refinance some of its foreign debt, and late last month the bank extended the repayment for another year.

VEB will be a “cornerstone investor” in the IPO, Kudrin said, while domestic and foreign investors will buy the remaining 7 percent. It will be possible to assess the profitability of the purchase in a minimum of three to five years, he said.

“Deripaska will lose control after issuing the 10 percent. But we’ll get the controlling stake after buying 3 percent,” Kudrin said. “VEB made this decision and I voted for it as a supervisory board member.”

The finance minister later clarified that he did not mean Deripaska would lose control over management of RusAl.

“When I said Deripaska and VEB would jointly control more than 50 percent, I didn’t mean that the government would control the company together with Deripaska. There will be more than 50 percent in total, from a mathematical point of view,” Kudrin said.

VEB will take part in running the company “within its 3 percent,” he said.

Analysts said the news should help RusAl’s chances for a successful listing.

“If VEB buys 3 percent in RusAl’s IPO, it will be easier for the company to find investors for the remaining 7 percent at the price RusAl wants to get for its shares,” said Alfa Bank analyst Maxim Semenovykh.

Reuters has reported that the bank could pay up to 18 billion rubles ($624.5 million), citing a government source.

That would value the company up to 600 billion rubles ($20.8 billion).

Onexim Group owner Mikhail Prokhorov, another RusAl shareholder, reached a tentative agreement earlier this month to swap debt for a 5.2 percent stake in the firm, which would raise his total holding to 19.2 percent, Vedomosti reported, citing sources close to Onexim and RusAl.

After restructuring RusAl’s debt to Prokhorov, Deripaska, who owns 56.8 percent through his En+ Group, would see his stake diluted to 53.39, the report said. Prokhorov now owns 14 percent of RusAl after selling the company a blocking stake in another mining giant, Norilsk Nickel, for shares and cash.

Under the current RusAl shareholders’ agreement, Deripaska will retain control of the company, even if his stake falls below 50 percent, a source close to RusAl’s shareholders told The Moscow Times.

Spokespeople for RusAl and VEB declined comment.

Kudrin said VEB would use its own funds to purchase the stake. VEB also manages money from the National Welfare Fund, part of which it invested in Russian blue chips last year to support the market. He earlier said VEB would use some of its 30 billion rubles in cash to buy RusAl shares.