Jan. 12 (Bloomberg) -- Investors should “avoid” the Hong Kong initial public offering of United Co. Rusal Ltd., the world’s biggest aluminum producer, because of the company’s debt, said Independent International Investment Research Plc.
The Moscow-based company’s plans to expand production capacity have been shelved indefinitely to preserve cash and the company can’t pay dividends until 2013 because of existing debt covenants, London-based analyst Ashish Tripathi said in a report dated Jan. 11.
Rusal, controlled by billionaire Oleg Deripaska, plans to raise as much as HK$20.1 billion ($2.6 billion) to pare debt, and become the first Russian company to sell shares in Hong Kong. The aluminum producer, selling shares at between HK$9.10 and HK$12.50 each, said yesterday the company is confident of meeting debt targets and is in a stable financial position.
“Considering the high-risk profile of the company due to its debt-laden balance sheet, we believe the issue is aggressively priced and hence rate the IPO an avoid,” the analyst wrote in a Jan. 11 report.
Tripathi values the stock at HK$10.41, 3.7 percent below the offer’s mid-point range of HK$10.80. Rusal said it has debt of $14.9 billion in its Dec. 31 prospectus and that all initial public offering proceeds will be used to repay creditors.
Rusal Misconception
“There is still a misconception that Rusal is in financial difficulty,” Artem Volynets, Rusal’s deputy chief executive officer, corporate strategy, said yesterday in a press conference in Hong Kong. “It is not. The company is in a stable financial position. We’ve reduced our costs, aluminum prices have risen and we have restructured our debt.”
Aluminum futures in London gained 45 percent last year as demand from automakers and builders improved. Demand in China, the biggest consumer of the metal, may have risen 12 percent last year, according to China Minmetals Corp.
A potential increase in output from high-cost aluminum smelters may restrict price gains beyond 2010, Tripathi said. The report was published in the Global Equity Offering Monitor, a research service published by Independent International Investment.
Rusal posted a net loss of $868 million in the first half of 2009, compared with a net income of $1.4 billion a year earlier. Profit won’t be less than $434 million for 2009, it said in its prospectus.
Profit excluding exceptional items may be $95.6 million for 2010, and $181.7 million for 2011, Independent International Investment Research said in the report.
Share Sale
The metal producer is selling 1.61 billion new shares, or a 10.6 percent stake, it said in filings to the Hong Kong stock exchange in December. Rusal may expand its IPO by another 225 million shares to meet additional demand, according to an e-mail sent to institutions on Jan. 4.
Vnesheconombank, the Russian state development bank also known as VEB; NR Investments Ltd., the principal investment company of billionaire Nathaniel Rothschild; New York hedge-fund manager Paulson & Co., and Malaysian billionaire Robert Kuok and companies controlled by him have agreed to buy HK$6.86 billion worth of shares in the IPO.
Rusal’s debt almost doubled after buying a quarter of OAO GMK Norilsk Nickel before commodity prices collapsed.
--Xiao Yu, with assistance from John Duce in Hong Kong and Brett Foley in London. Editors: Tan Hwee Ann, Andrew Hobbs
To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing atyxiao@bloomberg.net
No comments:
Post a Comment