UC RUSAL's $2.6 billion IPO fully subscribed-sources

By Kennix Chim and Michael Flaherty

HONG KONG/LONDON (Reuters) - The flotation of Russia's UC RUSAL, Hong Kong's first-ever primary offering by a non-Asian company, was fully subscribed on the third day of bookbuilding, people familiar with the matter said on Thursday.

RUSAL which is aiming to raise up to $2.6 billion, started taking orders, within its HK$9.10 to HK$12.50 a share price range, on Tuesday and will cease bookbuilding on January 21.

The deal has received heavy scrutiny as a result of the company's huge debt burden, outsider status and its high-profile founder, Russian billionaire Oleg Deripaska.

There are two teams for the eight-day roadshow, with company management in London on Thursday and Friday. The roadshow will continue in Europe and the United States.

The shares are scheduled to debut in Hong Kong and Paris on January 27. The deal also marks the first ever Hong Kong-Paris dual listing.

Rusal will trade under the symbol 0486 (0486.HK: Quote, Profile,Research) in Hong Kong, while global depositary shares, each equivalent to 20 common shares, will be traded on the professional segment of Euronext Paris.

"If you take my view of the aluminum market, progressing over the next two to three years, this could be a very interesting investment," said a London-based fund manager, who is actively looking at the Rusal deal.

"Given how strong Chinese data is at the moment, that scenario can lead to quite significant upward moving commodity prices," he added.

But given Rusal's high debt level, he said the IPO should price toward the mid-point of the indicated range.

The IPO was rated "AVOID" by London-based Independent International Investment Research (IIR), which expects the company's debt level to remain high at almost two times its equity after the listing.

"We believe at the mid-point of the offer price bank of HK$10.8 per share, the public offering is aggressively priced...," analyst Ashish Tripathi wrote in a report published on Monday.

IIR said Rusal is unlikely to pay any dividends in the next three years.

RUSAL said it planned to offer 1.6 billion shares. Around 40 percent of the offering has already been subscribed to by cornerstone investors, who are guaranteed shares but are subject to a lock-up period before they sell.

Cheung Kong Holdings (0001.HK: Quote, Profile, Research), the Hong Kong property group controlled by billionaire Li Ka-shing, also plans to invest $100 million into RUSAL, without a lock-up.

The other 60 percent of the offering was scooped up by institutional investors, after three days of meetings in Hong Kong, Singapore and London, the sources said. Retail investors are barred from the IPO.

The sources are involved in the deal but declined to be named because the offering is not yet public.

The mix of investors includes hedge funds, long-only funds, ultra-rich individuals, and commodity-related metals and mining funds, with orders coming from China, Hong Kong, Singapore, United Kingdom, Europe and the United States.

BNP Paribas (BNPP.PA: Quote, Profile, Research) and Credit Suisse (CSGN.VX: Quote, Profile, Research) are the joint sponsors and global coordinators.

The joint bookrunners are BofA-Merrill (BAC.N: Quote, Profile, Research), BOCI, Nomura Holdings (8604.T: Quote, Profile, Research), Renassiance Capital, Sberbank and VTB Capital, with Rothschild acting as the financial advisor.

(Additional reporting by Daisy Ku in London; Editing by Chris Lewis and Elaine Hardcastle)