* Rusal remains loss-making for the second year in a row
* Is trying to agree new deal with lenders before March 31
* Involves syndicated facilities amounting to $3.7 billion
* Aluminium producer posts $3.2 billion loss for 2013
(Writes through to focus on talks over debt, adds details,
By Polina Devitt and Polly Yam
MOSCOW/HONG KONG, March 28 Rusal, the
world's largest aluminium producer, could default on some of its
multi-billion dollar debt if it fails to reach a new deal with
creditors by Monday, it said after reporting its biggest annual
loss since 2008.
The company's earnings have been hammered by low aluminium
prices, which in 2013 fell back to levels last seen in the
aftermath of the financial crisis.
Rusal won a court ruling against the London Metal Exchange
(LME) on Thursday derailing plans that could have depressed
prices further by bringing more metal currently tied up in
warehouses on to the market.
Yet the market remains oversupplied, weighing on price
expectations - and Rusal, with a net debt of $10.1 billion, is
one of the most indebted Russian metals and mining firms.
The company has entered into negotiations with lenders to
amend the terms of syndicated facilities amounting to $3.7
billion of debt in order to defer repayments and modify
covenants, Rusal said in its 2013 earnings report on Friday.
"Management does not expect to complete these negotiations
before 31 March 2014, which is when the financial covenants will
be next tested and a breach of certain existing financial
covenants will result unless a waiver is obtained from the
syndicate beforehand," the company added.
If Rusal is unable to renegotiate terms, the lenders could
declare a default and trigger cross default provisions in its
other recently renegotiated loan facilities, the company said.
Rusal did not say which renegotiated facilities a cross
default could affect. It recently completed restructuring
negotiations with state lender Sberbank on $4.9
billion of debt and Gazprombank on $660 million.
The $3.7 billion of syndicated facilities includes loans of
about $1 billion from Russian lenders and the rest from
international creditors. The firm has received the approval to
amend the terms from lenders covering 75 percent of this amount
- including the Russian lenders - but must receive approval from
all creditors before March 31, it said.
If the company is able to defer repayments and modify
covenants, it would have to return $0.4 billion to lenders in
2014, $1 billion in 2015 and $2.1 billion in 2016. This schedule
would allow the company to maintain a sustainable cash position
in anticipation of market rebound, Rusal said in a presentation.
The company also said it had secured additional financing
from a major customer and identified several non-core assets
which may be sold to raise cash. It did not name the customer or
specify which non-core assets.
However, it said that it did not plan to sell its stake
worth $7 billion in Russian nickel producer Norilsk Nickel
and that it had secured $400 million in a prepayment
agreement with commodities trader and mining group Glencore
Xstrata Plc for alumina supplies.
$3.2 BLN LOSS
Rusal posted a $3.2 billion loss for 2013, hurt by $2.2
billion in impairment charges. It was its biggest annual loss
since 2008 when its net loss reached almost $6 billion. The
company remains loss-making for the second year in a row.
Its fourth-quarter earnings before interest, tax,
depreciation and amortisation (EBITDA) fell to $101 million,
from $221 million a year earlier and missed the average forecast
of $120 million in a Reuters poll of six banks.
Full-year revenue was down 10 percent at $9.8 billion after
Rusal shut down loss-making capacity and aluminium output fell 8
percent to 3.9 million tonnes. Rusal said the average LME
aluminium price fell 8.6 percent in 2013 to $1,845 per tonne.
Shares in Hong Kong-listed Rusal fell as much as 4 percent
after the firm's earnings were published, but rebounded later
and were up 2.9 percent by market close on Friday, against a 1.1
rise in the Hang Seng Index.
Sergey Donskoy, metals and mining analyst at Societe
Generale, said investors had reacted positively to the LME court
ruling and expected Rusal to reach a deal with creditors.
"They still have time to agree with lenders," he said. "I
think they're more likely (to reach a deal) than not," he added.
(Reporting by Polina Devitt in Moscow and Polly Yam in Hong
Kong; Additional reporting by James Pomfret and the Hong Kong
bureau; Editing by Pravin Char)