Rusal roulette

Oleg Deripaska, that well known friend of Peter Mandelson and George Osborne, has managed to get round Hong Kong Stock Exchange regulations and will float 10.6% of his US$26bn company Rusal in Hong Kong this month. Hong Kong normally requires its profit test to be passed and a minimum listing of 25% of a company's shares but it has waived both rules because of the size of the company (because of the size of the fees it will receive?). The 1141 page prospectus does not mince its words about the risks involved, warning that investors could lose every penny invested. Rusal has $16.8bn debt, $4.5bn of which is due this October to the state-owned Russian bank VEB. It is hoped that VEB will delay repayment and if this proves not to be the case investors can take comfort in a letter (with no guarantees attached) from another state-owned Russian bank, Sberbank, which states that it will assume the VEB debt and extend repayment until 2013. Another potential spanner in the works is the lawsuit proceeding at the High Court in London regarding a claim by Michael Cherney, Deripaska's former colleague, that is is owed 13% of Rusal. Were the Court to rule in Cherney's favour, there may be adverse implications for Rusal's debt repayment schedule and the whole company could go under. The prospectus even quotes an English judge's view that the lawsuit could not be heard in Russia because of the risks involved, including assassination. To prevent the retail punters from getting their hands burnt, the Hong Kong Stock Exchange is setting a minimum initial investment of HK$1m (US$129,000).