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. Last Updated: 07/27/2016

RusAl Sees 7-8 Year Extension On Loans

Aluminum giant United Company RusAl expects to secure an extra seven to eight years to repay its $7.3 billion debt to international banks and will not surrender a stake in the company as payment, a senior company director said.

RusAl, controlled by indebted billionaire Oleg Deripaska, also hopes this month to reach an agreement with state bank VEB on extending repayment of the $4.5 billion loan on which its stake in nickel miner Norilsk Nickel depends.

"We believe Russian banks will also support the global conditions of the restructuring. There may be slight differences in the details, which are also being discussed," said Oleg Mukhamedshin, RusAl's director for capital markets.

Mukhamedshin said the more than 70 international banks owed money by the world's largest aluminum producer were poised to agree to a grace period during which RusAl would be exempt from repayments.

"We are negotiating the final conditions, but it is already clear that the credits will be extended by seven to eight years, with a certain grace period," Mukhamedshin said late on Wednesday.

"The length of the grace period is being negotiated. It is expected to be at least two years."

RusAl's total debt, including that owed to Russian banks, was $16.8 billion, he said.

RusAl supplies 12 percent of the world's aluminum, the price of which has fallen to just over $1,500 a ton from an all-time high of $3,380 a ton last July.

In March, RusAl agreed to a two-month freeze on repayments to international banks that has since been extended again to June 11. Talks will continue at the start of next week.

"June 11 is not the end of the world," Mukhamedshin said. "It was clear from the very beginning that such a huge and complicated restructuring would need time."

He said RusAl expected to agree to the basic principles of debt repayment with foreign banks by the deadline, although the subsequent approval process might require a further extension.

Over the next three to four years, RusAl would take steps to reduce its debt, Mukhamedshin said. These might include an initial public share offering -- a plan that the company first promised within three years of its formation in March 2007.

"If some creditors want to participate in the IPO process, they will be able to buy shares, but we are not discussing converting debt into equity or other securities," Mukhamedshin said.

Within four years, he said, RusAl would have a debt level that it would consider "normal": a ratio of net debt to earnings before interest, tax, depreciation and amortization of 3 or less.

RusAl has unveiled plans to save $1.1 billion this year as it cuts aluminum output by 11 percent. In the first quarter alone, it saved $554 million.

Mukhamedshin said RusAl hoped soon to reach an agreement to extend its debt repayment to Russian banks. VEB is its single biggest Russian lender, and the fate of RusAl's one-quarter stake in Norilsk, placed collateral, rests on this debt.