It isn’t easy when you are marketing the first-ever IPO for a Russian metal company seeking a listing in Hong Kong. It’s harder still when the company has US$14 billion ($47 billion) in debts. Add to that a controversial CEO like Oleg Deripaska, who has had problems even trying to get a visa to enter the US to market his own company’s IPO to institutional investors.

Yet, in a market environment awash with liquidity, doing a US$2.6 billion capital-raising can be a piece of cake, as United Co Rusal, the Russian aluminium giant, found out last week. Four days, four cities and it was all over.

After months of speculation, Rusal finally took its IPO to the streets, with individual roadshows for a handful of Singapore investors being the first stop after the Hong Kong launch last week. Retail investors were barred by Hong Kong’s Securities and Futures Commission from partaking in the IPO, although several private banks across the region bought big chunks for their well-heeled private clients.

“Despite the ban on retail investors, the interest from institutions was very, very good,” deputy CEO Artem Volynets told The Edge Singapore in an interview as he ended a day of investor meetings in Singapore. “The response in Singapore and Hong Kong was way beyond our expectations. Investors realise that company like Rusal — a market leader in its sector and lowest-cost producer — doesn’t come to market that often. They wanted to get a piece of our IPO.” 

By the end of the week, as Rusal and its investment bankers moved from Singapore to London and continental Europe, the listing was all but wrapped up — oversubscribed and then some, as institutional investors chased after the first big IPO to come from Russia, which has been billed as the emerging market to watch this year. “We are glad that investors are looking at Russia as a hot emerging market just as our IPO is coming to the market,” says Volynets. But, Rusal’s management sees itself not as just another Russian company controlled by a billionaire oligarch but as a Hong Kong-listed global aluminium giant and a key supplier to China. 

How did a company like Rusal pull off an IPO like that? Getting the IPO done wasn’t that hard, particularly when 40% of the issue was taken up by key investors: Russian state development bank VEB; hedge-fund manager Nathaniel Rothschild’s private investment firm; US hedge-fund manager John Paulson; and Malaysian hotelier and commodities billionaire Robert Kuok. Just as Rusal began marketing the IPO, Hong Kong billionaire Li Ka-shing’s Cheung Kong Holdings put its hand up for a US$100 million stake. By the time Volynets boarded the plane to London, he had more or less got US$2.6 billion. The rest was just the icing on the cake. 

Now comes the hard part. With the IPO done, Rusal’s debts will be down to just over US$11 billion. That means it has paid off some of its short-term debts and is now on track to consolidate and expand, says Volynets. “We are a company that is at an inflexion point at a time when the global economy is recovering and demand for commodities like aluminium is picking up again,” he says. “More than any other metal, aluminium is linked to economic growth. If you are bullish on global recovery, you can’t be bearish on aluminium.”

With a listing in Hong Kong later this month, and with higher aluminium prices and better cash flow, Rusal is more than able to meet its restructuring obligations now,” he says. The company restructured its debts six months ago and is on track to cut them to more manageable levels. “The debts that remain will be seen more as operational and financial leverage,” says the Rusal deputy CEO.  

Volynets says Hong Kong was chosen because Rusal is an Asia-focused company selling to China and its closest peer Chalco (Aluminum Corp of China Ltd) is listed in Hong Kong. “Obviously, we looked at various places; London and even Singapore were good alternatives, but we picked Hong Kong because Chalco has its primary listing there and it’s the gateway to China, the most important commodity market in the world.”

He says while Rusal chose Hong Kong, there is no reason why other commodity-focused Russian companies won’t come to Singapore. “This is a big market, with a lot of commodity companies listed here, so I am sure there will be others.” The Singapore Exchange will be keeping its fingers crossed.

Assif Shameen is a consulting editor at The Edge Singapore

 
This article appeared in Corporate page, The Edge Malaysia, Issue 789, Jan 18-24, 2010