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. Last Updated: 07/27/2016

RusAl Pays Down Debt With IPO Funds

United Company RusAl paid off $2.14 billion of its estimated $14.9 billion of debt using funds raised from its initial public offering in Hong Kong, the company said in a statement Thursday.

The announcement came as officials from foreign stock exchanges descended on an investment forum to woo Russian firms in the wake of the first listing by a Russian firm on an Asian bourse.

RusAl, the world's biggest aluminum producer, said it had paid $1.46 billion to foreign lenders; $253 million to its Russian creditors, with the exception of Vneshekonombank; and $278 million to Mikhail Prokhorov's Onexim Group. The company also paid $152 million in fees to foreign banks, the statement said.

"RusAl has substantially exceeded its obligations to cut indebtedness in 2010 as determined by its debt restructuring agreements," the document said. "As a result, RusAl has to pay $3.3 billion to banks by the end of 2013."

The strategy RusAl has chosen to cope with the consequences of the financial crises will allow it to cut the rest of its debt "in the shortest possible time," said Oleg Mukhamedshin, RusAl's capital markets director.

The firm cut its debt from $16 billion to $14.9 billion after reaching a restructuring agreement in December with Prokhorov, who is also a 17.1 percent owner of the aluminum giant. Prokhorov exchanged $1.82 billion of RusAl's debt for a 6 percent stake in the firm.

The company also owes $4.5 billion to Vneshekonombank, which bought a 3.15 percent stake in RusAl's IPO in Hong Kong.

Senior officials at two of the world's largest stock exchanges said Thursday that RusAl's listing in Hong Kong was "very positive and promising."

This listing was "a very challenging, very interesting and very educational exercise for the exchange in Hong Kong," Ronald Arculli, chairman of the Hong Kong Stock Exchange, said at Troika Dialog's annual Russia Forum.

"RusAl's fund raising was the largest fund raising this year, and the trading of the shares after the IPO was very encouraging as well. From that point of view, I think, we can call RusAl's listing a success as far as the Hong Kong exchange is concerned," he said.

RusAl raised $2.24 billion in the IPO, selling its stock at 10.8 Hong Kong dollars per share ($1.39). The sale valued the company at $21.5 billion, a higher market capitalization than its main rival, U.S.-based Alcoa.

RusAl shares plunged, however, in their first day of trading and fell to a low of 9.35 Hong Kong dollars on Tuesday before recovering slightly on Wednesday. The stock closed down 1 percent at 9.41 Hong Kong dollars on Thursday.

RusAl's successful listing has occasioned growing interest among Russian firms in the possibility of selling shares on the Asian bourse as an alternative to the London Stock Exchange, formerly favored by Russian companies.

Oleg Deripaska's Basic Element holding company, which was majority owner of RusAl before the IPO diluted its stake to 47.59 percent, has indicated that it is considering selling stakes in several of its other subsidiaries.

Metals giant Metalloinvest, owned by billionaire Alisher Usmanov, also hopes to carry out an IPO in the first half of this year, The Sunday Times reported in January, quoting people close to the company.

The deal may be worth as much as $20 billion, and Usmanov may list the company's shares in Hong Kong rather than in London, the newspaper said.

Russian firms find the Hong Kong Stock Exchange attractive because of its liquidity, the transparency of its rules and its use of international accounting standards, Arculli said.

"When you have a quality market, you do have to attract quality companies," he told The Moscow Times. "Russian companies will look at the experience of RusAl which, I believe, is good, and they will also look at how RusAl's shares are trading in Hong Kong."

But London will likely to continue to play a big role in Russian companies' decisions on where to raise capital.

"Russian companies have a choice of markets depending on what they want to achieve. There's a number of options for the Russian companies depending on their strategy, and in general, as previously, London will remain the natural home for Russian companies," Tracey Pierce, director of primary markets at the London Stock Exchange, told The Moscow Times.

Nevertheless, most eyes are turned to Hong Kong for the coming year.

"We hope that for the rest of 2010 we'll have several more Russian companies applying to hold an IPO in Hong Kong" Arculli told The Moscow Times, declining to give the companies' names according to the bourse's policy. He added that the exchange would focus on those companies that operate extensively in Asia and China in particular.

Arculli said he would be "active" in introducing the Hong Kong Stock Exchange to the Russian business community at the forum.