Deripaska nears deal to retain his empire
|
 |
 26.05.2009 |
The Wall Street Journal
Gregory L. White
Embattled Russian tycoon Oleg Deripaska is close to agreements to restructure his companies' multibillion-dollar debts that should allow his empire to survive without losing control of its major assets, a top lieutenant said in an interview.
"We're now in the position where, except for a few difficult situations, we think the businesses will make it," Olga Zinovieva, first deputy chief executive of Mr. Deripaska's Basic Element holding company said. "The acute phase is past, and if we sign binding documents with creditors, the situation will be normalized and the businesses will get through it calmly."
Mr. Deripaska, once one of Russia's wealthiest men, was also one of its most aggressive businessmen. He borrowed heavily over the past few years from Russian and foreign banks to expand his empire, which ranges from metals to manufacturing, construction and finance. When the financial crisis hit last fall, he was among the first Russian tycoons to be forced to cede assets to creditors and sought a $4.5 billion bailout loan from the Kremlin. Many bankers and businessmen expected him to lose control of large swathes of his empire, whose companies had debts exceeding $20 billion.
For the Kremlin and many of his Western creditors, Mr. Deripaska has turned out to be too big to fail, according to people close to his debt-restructuring discussions. His companies account for just under 2% of Russia's gross domestic product and employ hundreds of thousands inside Russia, where unemployment is surging. Government officials so far have been reluctant to nationalize major companies, fearing that state bureaucrats will run them more poorly than their former private-sector owners.
Foreign banks, meanwhile, lent billions to Mr. Deripaska's companies and now are loath to write off the debts or push him into bankruptcy, because recovering money in Russian courts is notoriously difficult.
"No one wants to go in and aggressively immediately take the hit on these things," said a Western banker.
To be sure, a sharp drop in metals prices or a dramatic worsening of the global economy could send the group back into trouble and force more drastic measures, officials said. A failure to reach debt deals also could force it into messy litigation. "I think they're mistaken about how easy it's going to be to restructure," said a Russian banker.
But Ms. Zinovieva said United Co. Rusal, the aluminum giant that is the centerpiece of Mr. Deripaska's empire, expects to reach a restructuring deal over the next month stretching out repayment of $7.3 billion in loans from foreign banks.
Rusal also is hoping for a deal to restructure the $4.5 billion bailout loan it got from a Russian state bank last fall. That loan comes due in November, and Rusal officials have said they don't expect to be able to repay it. Ms. Zinovieva said restructuring that debt is "not an easy question," but talks are under way with the government.
The bailout loan was granted to keep Rusal from losing to foreign creditors a 25% stake in Russia's OAO Norilsk Nickel that it had pledged as security on a loan. The state bank now holds that stake, as well as other Rusal assets as collateral for the bailout loan. The idea of swapping that debt for equity in Rusal was met "without enthusiasm" by the government, Ms. Zinovieva said.
Instead, people close to Rusal said the company could be forced to cede the Norilsk stake to the government or to sell it to pay off the loan. Rusal had bought the stake as a first step to a merger with Norilsk, but Mr. Deripaska dropped that idea as the crisis worsened in the fall.
Ms. Zinovieva said Basic Element opposes the idea proposed by other Russian metals groups to merge their holdings into a partly state-owned national giant. "We think we should put our own businesses in order and then talk about merging," she said.
Across Basic Element's other holdings, she said, the group had lost "relatively little" to creditors in the crisis. The main assets taken by lenders were minority stakes in foreign automotive and construction companies that Mr. Deripaska bought before the crisis with loans secured by the shares themselves. Basic Element also gave up control of its bank, which was rescued by regulators. Ms. Zinovieva said the group's property unit also might see some real-estate projects turned over to lenders to repay debts.
But in the core assets, she said, the group will retain its stakes and doesn't expect to seek new investors for Basic Element itself.
At Rusal, an aggressive cost-cutting program has brought production costs below world-market prices, Ms. Zinovieva said.
"In some areas, things are actually improving, and we think that in many businesses the third and fourth quarters will be better than the first and the second," she said, citing Rusal, as well as forestry and insurance.
At automaker OAO Gaz, Ms. Zinovieva said, the outlook isn't so upbeat. About half the company's bank creditors have agreed to a restructuring, as have most bondholders, she said. The company has slashed its bloated work force amid plunging demand for its vehicles since the crisis hit in the fall.
<< previousnext >>
back to the news archive
|
