Rusal to Seek $5 Billion Debt Refinancing Including First Bond

United Co. Rusal plans to begin discussions with banks early next year for $5 billion of debt as the world’s largest aluminum producer prepares to issue its first international bond.

Rusal plans to start the talks in the first quarter of 2011, Oleg Mukhamedshin, deputy chief executive officer of the Moscow-based company, said today in an interview in London. The refinancing plans include new loans and a bond targeted to foreign investors.

“Our target is to refine our existing debt profile by extending the maturities and reducing interest costs,” Mukhamedshin said. “We are working quite closely with rating agencies to establish a credit rating for Rusal to facilitate our debut international bond issuance.”

Mukhamedshin expects to negotiate lower borrowing costs after cutting the margin the company pays over the London interbank offered rate to 450 basis points in September, from 550 basis points in June and 700 basis points in December 2009.

Rusal restructured almost $17 billion of obligations last year to more than 70 lenders as demand for metals slumped in the global recession. The company lowered its net debt to $11.8 billion this year from $13.6 billion at the end of 2009, according to financial statements.

Russian companies raised $19.5 billion this year compared with $12 billion in the same period of 2009, Bloomberg data show, as banks increase lending in an economy forecast to expand by 4 percent this year.

Libor, the rate banks charge to lend each other, is 0.3034 percent. A basis point is 0.01 percentage point.

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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