Rusal Defends Refusal to Sell Norilsk Nickel Stake as Share Price Climbs

Bloomberg Jan 19--United Co. Rusal, facing investor questions for refusing to sell its stake in nickel producer OAO Norilsk Nickel to cut debts, said it continuously benefits from the shareholding.

“The price of the Norilsk stake is going up and that helps our balance sheet,” Oleg Mukhamedshin, deputy chief executive officer of the biggest aluminum producer, told Bloomberg TV. “We’re benefiting every day.”

Norilsk management led by Chief Executive Officer Vladimir Strzhalkovsky offered Rusal at least $12 billion last month for the aluminum maker’s 25 percent stake, seeking to end a four- year battle for control of the nickel producer. The sale should go ahead as it would increase Rusal’s market value by a “minimum 50 percent,” the aluminum maker’s second-largest owner, Mikhail Prokhorov, said Dec. 23. Rusal said Dec. 29 it had no intention of selling.

Rusal’s debt almost doubled after it bought Norilsk shares in 2008 before commodity prices collapsed, leading to a net loss of $6 billion that year. Still, holding Norilsk shares helped Rusal return to profit in 2009 as their value doubled. Norilsk has surged a further 77 percent since Jan. 1 last year.

Morgan Stanley would boost its Rusal valuation by HK$1.60, or more than 10 percent, if the aluminum maker sold Norilsk shares as that would help it to fund new development projects, analyst Dmitriy Kolomytsyn said in a report yesterday. Rusal’s market value is depressed by debt it built up through the purchase of the Norilsk stake, Prokhorov said last month.

Rusal’s debt repayments may be as much as $1.5 billion a year over four years, Troika Dialog said after the company restructured more than $7.4 billion of borrowing in 2009. The producer’s net debt fell to below $12 billion as of Sept. 30.