China Development Bank playing hardball over Rusal loan reform
We see that events around one of our favourite stocks Rusal remain as confused as ever.
The Russian aluminium company has attracted some interest with a Hong Kong stock exchange announcement recently about a connected transaction. This involves the sale of a subsidiary company to be carried out by Renaissance Securities. It's considered a connected transaction because Renaissance is owned by Mikhail Prokhorov, is a 17 per cent shareholder in Rusal and his nominee sits on the Rusal board. Interestingly the subsidiary is not mentioned. Rusal has declined to confirm the name of the asset but Bloomberg and the website Dances With Bears say the company in question is the Aluminium Smelter Company of Nigeria (Alscon). Unfortunately Alscon doesn't belong to Rusal, according to the Nigerian Supreme Court.
In July 2012, following an eight-year long case the Nigerian Supreme Court ruled it was illegal for Nigeria's privatisation agency, the Bureau of Public Enterprises, to sell Alscon to Rusal. Rusal secured Alscon in December 2006 with a bid of US$250 million in shares, US$130 million in cash and a raft of conditions, Dances with Bears reports. With this bid, Rusal arranged with Nigeria's privatisation agency to overrule a US$410 million cash offer by the Bancorp Financial Investment Group Divino Corporation (BFIG), a Nigerian-American group based in Los Angeles. BFIG initially launched its first suit in Manhattan, charging Rusal with conspiracy to commit fraud. A US judge subsequently ordered Rusal to face trial in Nigeria. At the end of April, the Federal High Court in Abuja is scheduled to rule on BFIG's motion to enforce the 2012 Supreme Court order and strip Rusal of the smelter shareholding. BFIG will also start its suit against Rusal for US$2.8 billion in lost or unrealised profits, damages and costs.
It's a mystery as to who would want to buy Alscon under these circumstances. But there has been speculation it is some sort of deal cooked up between Rusal CEO Oleg Deripaska and Prokhorov to try and give Rusal a measure of protection from the BFIG suit. Rusal is in dire need of cash. It is in the throes of trying to restructure its debts and has asked for banks' forbearance over a US$4.75 billion loan and not to exercise certain rights until July 7.
One bank that is showing some reluctance over the deal is China Development Bank. The bank has not publicly stated its position on the loan. In recent years it aggressively expanded its loan book, but in the last few months since Han Baoxing replaced Liu Hao, as the head of CDB's Hong Kong branch, the bank has been noticeably less visible in the loan market. One view is that CDB is playing hardball and wants to end its entanglement with Rusal. It therefore either wants the Russian state banks to take over its Rusal loans or for Rusal to sell its 27.8 per cent stake in the Russian zinc giant Norilsk Nickel. At today's price this has a value of almost US$8 billion. However, Deripaska has over the years steadfastly refused to do this, to the frustration of other Rusal shareholders. It's thought this matter will be raised during President Vladimir Putin's discussions with President Xi Jinping in China next month.
We see the Hong Kong Internet Registration Corporation has been handing out awards for its fifth so-called Top 10 .hk Website Competition. The winners in the Commercial and Non-Commercial categories included the Kowloon Motor Bus Company, Deals Hong Kong and Bo Charity Foundation for its site www.foodangel.org.hk which raises awareness about food wastage, and The Hong Kong Society for the Aged's site www.e123.hk There was a category for government departments which was won by the Observatory for its weather app, and RTHK. There were four awards for Legco members' Outstanding Websites, going to Charles Mok, Fernando Cheung Chiu-hung, Wong Yuk-man and Elizabeth Quat who likes to prefix her name with Dr, though doubts as to the validity of her doctorate have been raised in the press and websites recently.
In yesterday's column we inexplicably and erroneously referred to the director of the central government's liaison office in Hong Kong, as Zhang Xiaomi, when his name of course is Zhang Xiaoming. For that we apologise.
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