June 10, 2019 / 9:00 AM / 3 months ago

Russia's Rusal prepares for Panda bond, project finance for new smelter

MOSCOW, June 10 (Reuters) - Russia’s Rusal has told Reuters it plans to issue a Chinese yuan-denominated bond, known as a Panda bond, and also a rouble bond as the aluminium giant, which was removed from a U.S. sanctions list in early 2019, returns to raising funds.

Hong-Kong listed Rusal, the world’s largest aluminium producer outside China, was largely cut off from borrowing between April 2018 and January because of the sanctions imposed on it and its founder Oleg Deripaska, but was exempted from sanctions after Deripaska gave up control of the firm.

“We see that all the key banks are actively returning to us with proposals for different instruments. We are analysing them and will use these opportunities if necessary,” said Oleg Mukhamedshin, head of equity and strategic development at Rusal.

Rusal, which last tapped the Chinese bond market in 2017, plans to issue the bond as soon as it obtains credit ratings from Chinese agencies.

Mukhamedshin did not disclose the size of the future Panda bond but said Rusal was also preparing for a rouble bond issue in the very near future.

In its first debt issue since sanctions were lifted, Rusal raised 15 billion roubles ($232 million), up from an original plan to raise 10 billion roubles due to higher than expected demand.

The final size of the upcoming rouble bond will depend on demand but the company will start again from 10 billion roubles, Mukhamedshin said.

Rusal has repeatedly stated that business is back to normal since it was freed of the sanctions. There are no major debt repayments coming up and it should repay $370 million to its lenders by year-end.

Asked if Rusal would resume dividend payments this year, Mukhamedshin said that this had not been discussed yet.

Rusal has also returned to its pre-sanctions plan to raise funds to build its Taishet aluminium smelter in Siberia. The 60 billion roubles ($926 million) needed for this project will come from a syndicate of Russian banks by the end of 2019, he said.

Last autumn Rusal signed fewer sales contracts for 2019 for its value-added products (VAP) due to sanctions.

“The majority of clients are returning to us. The main negotiations on resuming contracts will be in autumn, and next year, there should be a relatively normal order book and a significantly higher share of products with added value,” Mukhamedshin said. ($1 = 64.7712 roubles) (Reporting by Polina Devitt; editing by Louise Heavens)

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