UC Rusal agrees terms for restructuring $7.5 bln debt

United Company Rusal, Russia’s largest aluminum producer, has agreed on terms for restructuring a U.S. $7.5 billion debt to banks, business daily Kommersant reported Thursday, citing a document on the restructuring terms sent to the government by UC Rusal’s controlling shareholder Oleg Deripaska.

Under the agreed terms, creditors defer repayment of principal debt for up to three months starting February 16. After three months, UC Rusal hopes to restructure the debt for two years.

Under an agreement with creditors, UC Rusal should provide a "comfort letter" from the government confirming that the government supports UC Rusal’s restructuring plans, including the restructuring of its debts to state-owned banks, the daily reported.

A "comfort letter" should indicate that the government accepted Deripaska’s proposal to convert UC Rusal’s debt to state-owned banks into long-term bonds that are convertible to preferred shares, the daily reported.

Under current terms UC Rusal is expected to repay a total of $8.1 billion including principal and interest payment from February through December, according to the document.

If the prices for aluminum stay at the current level until July, UC Rusal will face shortage of funds and will be unable to repay its debt under the current schedule, the request for the government funds reads. Of the total debt, UC Rusal owes $1.8 billion including $200 million of interest to foreign banks; $4.8 billion including $300 million of interest to state-owned Vnesheconombank; and $1.5 billion including $200 million of interests to other Russian banks.

However, the government may refuse to give UC Rusal a "comfort letter", as it is only prepared to give "political support" to the company, which is unlikely to satisfy creditors, the daily reported citing sources close to the talks among UC Rusal, its creditor banks, and the government.