OREANDA-NEWS. On 31 July 2009 UC RUSAL, the world's largest aluminium and alumina producer, announced that it has agreed the principal terms of a long-term debt restructuring with the Coordinating Committee which represents more than 70 international lenders. According to the agreement, RUSAL will settle its debt to international banks within seven years. The agreement puts RUSAL on a strong and stable financial footing and ensures that the business is capable of weathering the current economic environment.

The restructuring will be split into two phases. During the first period of four years, RUSAL will focus on maximising efficiencies across the business and taking full advantage of the recovery in demand. RUSAL has periodical debt reduction targets in place and will seek to repay a total of USD 5bn of debt owed to all lenders by Q4 2013.

During this period principal repayments will be made on a "pay-if-you-can" basis based on the performance of the business, thereby ensuring the full sustainability and integrity of its operations. Interest will be paid partly in cash, at a rate ranging from LIBOR + 1.75% to 3.5%, with the remaining portion to be capitalised. Furthermore, in order to preserve cash for lenders and the business, no dividends will be paid until such a time that Net Debt/EBITDA reaches 3x. 

The second phase of the restructuring will involve the refinancing of the remaining debt by existing lenders for an additional three years. Such refinancing will be at RUSAL's option, as it may opt for an alternative refinancing of the debt on market terms should this prove more favourable to the company.

The Coordinating Committee has also approved the use of the company's cash flows to finance the completion of the construction of the Boguchanskaya Hydro Power Plant, a priority project of strategic importance for the company.

The restructuring is subject to credit committee approval by RUSAL's international lenders, as well as finalisation of relevant legal documentation. RUSAL also expects to reach an agreement with its Russian lenders in the coming months.

Commenting, Oleg Deripaska, Chief Executive of RUSAL, said: "This is a landmark restructuring for RUSAL and an endorsement for Russian businesses from the international lending community. I would like to thank our lenders for the strong support they continue to show RUSAL which has resulted in the agreement we have announced today which provides RUSAL with a stable financial footing for the future. This is the best possible outcome for our customers, suppliers and employees across the business. We are well positioned to weather the current economic conditions preserving RUSAL's position as the no.1 player and most efficient producer in the global aluminium industry."