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The First Russian Casualty: World's Largest Aluminum Company, Rusal, Warns It May Default

Tyler Durden's picture




 

While it is easy to blame western sanctions for the recent tribulations at the world's largest aluminum company, Oleg Deripaska's Rusal, the reality is that the industry specific issues plaguing aluminum makers, certainly including former Dow Jones Industrial Average member Alcoa, which involve a fair share of manipulation of physical inventories at assorted global warehouses are much more responsible than some theatrical rhetoric flaring up between the West and East in the past month. Regardless of the cause, as FT reports, Rusal just announced it is on the verge of insolvency after it warned of "material uncertainty" about its future, and that it has asked its creditors to delay repayment on a maturity from its $10 billion debt pile due next month.

From the FT:

Rusal warned of “material uncertainty” over its future as the world’s largest aluminium producer reported a $3.2bn loss in its worst annual performance since 2008.

 

The Russian aluminium group, controlled by Oleg Deripaska and listed in Hong Kong, confirmed that it had asked lenders to delay a repayment due next month on part of its $10bn net debt pile.

 

It said that it expected to complete long-running negotiations with its banks to amend the terms of its debt, but warned that there could be no certainty it would succeed.

 

Management acknowledge that these conditions result in the existence of a material uncertainty with respect to the group’s ability to continue as a going concern,” the company said. Rusal’s auditor, KPMG, included an “emphasis of matter” paragraph in its report on the company’s earnings statement to draw attention to the issue.

Any other time, a successful waiver or debt extension (at a price) would have been guaranteed, thank the unprecedented amount of liquidity sloshing around desperate to earning some, any return, but now that politicians are involved, it would not be surprising if a Steve Ratner-type figure were to make a few phone calls to Rusal's offshore lenders, and force them to demand payment or else put the company - long a shining star of the Russian commodity landscape - in default, a move which would certainly leave a mark on Vladimir Putin's ego, if not his bottom line. After all, Putin would certainly enjoy getting additional "equity" stakes in other domestic commodity companies in exchange for bail outs.

FT's take: "Rusal’s difficulties highlight the plight of Russia’s metals sector as it struggles under the burden of a slowing economy, weak commodity markets and the imposition of sanctions from the west." Fine - force it to default. The temporary plunge in supply will simply drive the price of aluminum higher, and in the meantime, Rusal's new owner will be the Russian government itself.

FT is more accurate in its assessment of how the company ended up in a sorry state that reflects the near-crash Russia's commodity industry found itself in early 2009:

Rusal’s $3.2bn loss was exacerbated by $1.9bn in writedowns and restructuring charges as it closed high-cost plants in an attempt to reduce costs. It was its worst annual performance since a $6bn loss in 2008.

 

The company’s aluminium production fell 7.6 per cent from 2012 to 3.9m tonnes, while its production cost per tonne fell 3.6 per cent over the year to $1,864. Benchmark aluminium prices on Friday were trading at $1,753 a tonne.

 

Mr Deripaska, chief executive, said the company had “gone through a difficult, but important transformation” and predicted resilient demand for aluminium. Rusal has been weighed down by high debts since it spent $14bn to buy a stake in Norilsk Nickel in 2008 just before metals prices tumbled in the financial crisis. It underwent a huge restructuring in 2009, but has remained highly leveraged.

 

The company had succeeded in restructuring loans of $4.9bn from Sberbank and $660m from Gazprombank, it said. It also received, in February, $400m in prepayment financing for alumina from Glencore Xstrata, which holds an 8.75 per cent stake in the company and is its single largest trading counterparty.

 

However, it has yet to reach unanimous agreement with a syndicate of lenders on restructuring $3.7bn of pre-export finance facilities. A person familiar with the matter said that only a handful of banks had not yet agreed to new terms, which would waive mandatory repayments on Rusal’s debt until 2016.

In a nutshell Rusal has become a curious nexus of three distinct issues: i) corporate overleverage, a pervasive problem for corporations which as we pointed out a month ago have far more net debt than they did at the last bubble peak; ii) an industry in decline as the key marginal market, China, is no longer in peak euphoria mode - one need only look at the most recent "non-one time, non-nonrecurring charges" Alcoa earnings report to see how the aluminum space is going from bad to worse, and iii) a new political wildcard, as it is increasingly becoming obvious that the next cold war will be fought in bank board rooms, at least from the perspective of the US.

There is a fourth point. Rusal on Thursday received a surprise boost when it won a court battle over proposed new London Metal Exchange trading rules, which the aluminium producer said had helped to push down prices.

In other words, if something does happen to Rusal, one can expect an accelerated discovery of just how the big banks and commodity trading firms are abusing commodity warehouses in and out of the US, in order to manipulate prices - something the Fed recently promised it too would look into, although nobody is holding their breath, as among the firms most directly impacted would be Goldman and JPMorgan, not to mention Swiss giant Glencore.

So pay close attention to Rusal - should it indeed default, Putin may take that as an unwillingness to negotate (assuming of course this was not the desired outcome all along) a forbearance by the West as an escalation going directly at Russia's lifeblood. How Putin would retaliate is unknown, but since the former KGB spy has had the bulk of his recent foreign policy wins in the geopolitical map, one could see why Ukraine, of all places, and all other former USSR member countries, should be nervous to quite nervous should the world's largest aluminum company file for bankruptcy protection in the coming weeks.

 

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Fri, 03/28/2014 - 15:59 | 4603535 Deathrips
Deathrips's picture

Coming to many Silver and Gold companies near you...shortly.

 

By manipulating the base metals up, they can discount all in cash costs of real precious metals productions. Remember goldman sucks and the aluminum warehouses?

 

See what happens Larry? You see what happens when you fuck free markets in the ass?

 

Stack it!!

 

RIPS

Fri, 03/28/2014 - 16:17 | 4603614 Rafferty
Rafferty's picture

Manipulating commodity prices?  Good heavens!  Who could have imagined?

Fri, 03/28/2014 - 16:24 | 4603638 aVileRat
aVileRat's picture

In Soviet Russia, aluminum cans crushes you (equity)

What a bunch of idiots. This is the 4th time now Rusal has needed a bailout since 2001. Between Alcoa and these guys, I have no damn idea how your product is the most used fabrication material behind PVC, and yet, somehow you can not turn a profit, ever.

 

Fri, 03/28/2014 - 16:37 | 4603677 Quantum Nucleonics
Quantum Nucleonics's picture

Why can't they ever turn a profit... because China by itself has double the capacity needed to meet world demand.

Fri, 03/28/2014 - 16:45 | 4603692 knukles
knukles's picture

Oh Fuck No!
It's nothing to do with industry or company specifics.
These are Hero of Capitalism Boy Wonder's Sanctions Biting at the Very Heart of the Dark Empire of Communist Evil

Fucktards

And I'll betcha in a Socialist economy, they get bailed out, as in... grabbed by the State and Resold to Another Bunch of Crony Capitalistas.

Fri, 03/28/2014 - 16:56 | 4603732 ParkAveFlasher
ParkAveFlasher's picture

Maybe they can't turn a profit because control of pricing is completely out of their hands.  We will see!

Fri, 03/28/2014 - 18:04 | 4603969 zaphod
zaphod's picture

"and that it has asked its creditors to delay repayment on a maturity from its $10 billion debt pile due next month."

Why doesn't Putin just print those $10B and fix this nice and easy. It's what the US does.

Fri, 03/28/2014 - 17:24 | 4603807 SAT 800
SAT 800's picture

Over-installed capacity is a feature of all major modern industrial downturns-depressions; including this one. As you say, it's hardly notworthy. Alcoa is in trouble too. Since this is an article about metals prices I'll post my purchase of a July Silver contract today at $19.840. It looks like it will be easier for the price to rally rather than deteriorate from this point. Any further bad news, ( what could go wrong?); might be productive also.

Sat, 03/29/2014 - 01:33 | 4604954 Offthebeach
Offthebeach's picture

Henry Ford can't move Model T sales up. Hammurabi has clay tablet excess. Anyone want a marvel PC?

Yup. Just market signal. Its all good, in a way. Shuffle cards, deal again.....

Fri, 03/28/2014 - 16:44 | 4603693 Flakmeister
Flakmeister's picture

Enormous over capacity....

Fri, 03/28/2014 - 18:25 | 4604047 css1971
css1971's picture

And processing costs. Bauxite -> Aluminium is insanely expensive in energy terms.

Fri, 03/28/2014 - 18:33 | 4604081 Flakmeister
Flakmeister's picture

Aluminum is basically solidified electricity...

But almost every major plant I know of benefits from fairly cheap hydro-electric...

Mon, 04/07/2014 - 22:48 | 4634566 MeelionDollerBogus
MeelionDollerBogus's picture

Indeed: the metal is incredibly useful but if we don't re-use it, just let it go to dumps, it's such a waste of resources. And then there's the red mud. Nothing but nothing so far gets rid of that crap and when it gets loose catastrophe is the only conclusion.

Fri, 03/28/2014 - 18:29 | 4604060 Emergency Ward
Emergency Ward's picture

That same old thing that crushes many great investments........

Fri, 03/28/2014 - 17:32 | 4603832 debtor of last ...
debtor of last resort's picture

Because, vile rat, it's rather impossible to get a life with a rehypothecated dick in your left eye.

Fri, 03/28/2014 - 15:57 | 4603543 Gringo Viejo
Gringo Viejo's picture

What's good for M&M Enterprises is good for America.

Fri, 03/28/2014 - 15:59 | 4603548 Mr Giggles
Mr Giggles's picture

Have you met the boss, a new ride, look into it, just sayin.

Fri, 03/28/2014 - 16:00 | 4603550 richsob
richsob's picture

We can always trust that paragon of virtue, Vladimir Putin, to do what is honest and fair. He would never put his own selfish interests above those of the Russian people. That is what made him the modest, if nearly impoverished, beacon of integrity he is today.

Fri, 03/28/2014 - 18:20 | 4604028 css1971
css1971's picture

Actually, what I find most refreshing about Putin is the brutal honesty. They said they were willing to go to war over Crimea and then went ahead and walked in.

The US invasion of Iraq for example was preceded by months (years) of bald faced lies and conditioning by all media outlets.

Fri, 03/28/2014 - 18:23 | 4604041 Emergency Ward
Emergency Ward's picture

Good thing the US and the EU have Prince Valiant Obama to straighten him out.....

Fri, 03/28/2014 - 16:01 | 4603555 Cursive
Cursive's picture

Hmm.  I don't understand this in the context of so many ZH posters telling me Russia has no external debt, Russia is not beholden to Western capital and Russia holds all of the natural resource cards....

Fri, 03/28/2014 - 16:18 | 4603615 RadioactiveRant
RadioactiveRant's picture

P { margin-bottom: 0.21cm; }

It makes sense if you only take a superficial look at the figures and ignore the interdependent nature of Russian business and government. Whats bizare is the way so many on ZH are cheering Russia on

Fri, 03/28/2014 - 16:29 | 4603650 Cursive
Cursive's picture

@RadioactiveRant

Whats bizare is the way so many on ZH are cheering Russia on

Yes!  I love ZH; hell, I spend a lot of time here.  I can't, for the life of me understand these posters who are all over Putin's jock.  As I said before, some people enjoy choosing who their master will be and many have decided they'd rather let Putin beat them down than to let Obama beat them down.  I'll take "none of the above" for the win.

Fri, 03/28/2014 - 16:34 | 4603665 McMolotov
McMolotov's picture

I think there's a difference between cheering for Russia and finding humor in watching the schoolyard bully pick a fight with the wrong person.

That said, there's humor in it only so long as they don't pull out their guns and start shooting everyone around them.

Fri, 03/28/2014 - 16:45 | 4603695 Cursive
Cursive's picture

@McMolotov

This is serious business.  People have already died.  Anyone who has followed my comments here knows how I feel about the sad state of Western "democracies" and the bankster cabal.  I'm just as much a critic of the West as I am of Putinland.  I also think Russia has a lot more to lose in the Ukraine flop than the West has to lose; however, the biggest losers will be the Ukrainian people and freedom lovers everywhere.

Fri, 03/28/2014 - 16:49 | 4603715 knukles
knukles's picture

Oh, come on it all makes sense.
A buncha Libertarians cheering on a totalitarian dictator.

Uh huh....
While it's easy to respect Vlad the Bad because he does what he says and noting else... the Dude has Balls... and well....
It does not make sense to have a man crush on the guy, FFS
He is not a leader of good, right, freedom and the individual being above the state.
Oh, golly, that sounds so close to home ...

dudn'nit?

Fri, 03/28/2014 - 16:56 | 4603730 Cursive
Cursive's picture

@knukles

Yeah, you right, bro.  I don't want either, but I would put money on Putin over the Choomer-in-Chief in a hand-to-hand combat situation.

Fri, 03/28/2014 - 17:10 | 4603770 fonzannoon
Fri, 03/28/2014 - 18:01 | 4603943 The Gooch
The Gooch's picture

Nice.

Best part was the (taxpayer funded) "get covered" disaster care banner ad above the article.

 

 

Fri, 03/28/2014 - 18:20 | 4604025 Emergency Ward
Emergency Ward's picture

Some give an acknowledgement to the "other gang's thug" because he makes the hypocritical, interventionist, warmongering figureheads of the US/EU look like a bunch of hypocritical, interventionist, warmongering gangsters, which they are.

Fri, 03/28/2014 - 17:41 | 4603869 Ban KKiller
Ban KKiller's picture

Let's all use the right words...Fascism, cronyism, corruption.

Yes, I know we would use them often on discussing our fearless leaders.

Death, by law, to the Banksters. My slogan. 

Sat, 03/29/2014 - 01:52 | 4604965 Offthebeach
Offthebeach's picture

Graveyards are full of KGB Colonels. Ask Stalin. Putin is a umbrella pric away from a dirt nap, or a Gulfstram 5 flight to a French Riviera retirement.

Fri, 03/28/2014 - 16:43 | 4603690 Goldenballs
Goldenballs's picture

People actually appreciate a leader who stands for the people,nation and its interests instead of Wester leaders who just ignore and screw the people once elected.

Fri, 03/28/2014 - 16:45 | 4603697 Flakmeister
Flakmeister's picture

And who would that be?

Fri, 03/28/2014 - 17:15 | 4603780 jopa
jopa's picture

nobody !

Fri, 03/28/2014 - 18:33 | 4604086 fightthepower
fightthepower's picture

Putin

Fri, 03/28/2014 - 18:54 | 4604168 RadioactiveRant
RadioactiveRant's picture

I'm not convinced Putin is putting his people first, he's putting territorial gain which will produce no obvious benefit, ahead of trading agreements that have given his people that limited wealth they currently enjoy. He's a fag with a Freudian point to prove.

At best the world gains "MOAR" instability, worst we all die Hiroshima styleee.

Fri, 03/28/2014 - 17:43 | 4603878 Apeman
Apeman's picture

Personally, I'm all over his jock because he's the enemy of my enemy. He might not be an angel, but fuck yes I'm cheering him on.

Fri, 03/28/2014 - 18:01 | 4603949 Cursive
Cursive's picture

@Apeman

I'm for {psychopath #2} since he's the enemy of {psychopath #1}.

 

I guess this is the mentality that propels psychopaths into power.

Fri, 03/28/2014 - 17:45 | 4603889 roadhazard
roadhazard's picture

Putin is white.

Fri, 03/28/2014 - 19:11 | 4604208 Rusty Shorts
Rusty Shorts's picture

Correct, therefore Putin is a minority, and is elegible for all sorts of .gov aid.

Fri, 03/28/2014 - 18:20 | 4603999 Hongcha
Hongcha's picture

Cursive, not in all cases.  Vlad is a reptile; but I am sickened by the degree to which Messiah and his senate and his admin has debased the office of the POTUS, acted as sherpas for alien interests and dragged this country down a road from which there will be no return for a long, ling time ... I frankly take some satisfaction seeing them get and their Brussels lapdogs get beat.  

They have systematically dismantled the USA.  I have found that 'hijacked' is the best way to describe the status of our Fed.

Fri, 03/28/2014 - 18:29 | 4604064 Cursive
Cursive's picture

@Hongcha

Hmm.  I fail to see how cheering for one dickhead makes another dickhead less offensive.  What is the personal psychology of someone who finds validation in which master he chooses?  It is reminescent of the middle-aged woman who is always looking for some man to define her.

 

P.S. Bitchin avatar.

Sat, 03/29/2014 - 09:47 | 4605221 skepsis101
skepsis101's picture

Would you really rather see a unipolar world?  You may never have "none of the above" again once this is over unless China and Russia stay in the game.  One doesn't have to love the opponent to cheer the underdog on. The more multipolar the world is, the greater the potential for freedom among the interstices.  The closer we get the New World Order, the scarier shit becomes.

Fri, 03/28/2014 - 16:19 | 4603619 Joe A
Joe A's picture

When ZH posters talk about external Russian debt they talk about Russian government debt, not debt of Russian companies. So this companies defaults, Putin nationalizes it and it will then remain to be seen if creditors will get compensation.

Fri, 03/28/2014 - 16:36 | 4603643 Cursive
Cursive's picture

@Joe A

I'm gonna put this in all caps to emphasize the point, hopefully you and everyone else who is clueless will finally get the point:  THE RUSSIAN STATE DOES HAVE EXTERNAL DEBT

http://rt.com/business/russia-foreign-debt-growth-007/

http://www.reuters.com/article/2014/03/11/ukraine-crisis-russia-debt-idUSL6N0M72U720140311

http://www.tradingeconomics.com/russia/external-debt

Fri, 03/28/2014 - 17:22 | 4603801 Joe A
Joe A's picture

Where do I say that the Russian state has no external debt?

Here is a link for you to see the extent of Russia's debt and that of other countries.

http://www.usdebtclock.org/world-debt-clock.html

Click on the nice big green letters next to that eagle thingie in the middle to get an overview of US debt, government, business, household and a lot more.

Fri, 03/28/2014 - 17:31 | 4603820 Cursive
Cursive's picture

@Joe A

I re-read what you originally wrote and am slightly confused at the point you were making.  Both the Kremlin AND Russian private companies have foreign debt levels that are worrisome for them.

Fri, 03/28/2014 - 17:46 | 4603891 Joe A
Joe A's picture

Did you look at these figures of the link I sent you?

6% public debt to GDP ratio and 32.5% external debt to GDP ratio are not at all worrisome for the Russian state. Take a look at other countries there. Their debts are truly worrisome. As for Russian companies I don't know much about their debts but read my comment on your other post below.

Fri, 03/28/2014 - 17:54 | 4603928 Cursive
Cursive's picture

@Joe A

The problem is that it is difficult to separate Russian state debt from the debt of the private Russian companies (which I think may have been the point you were making originally?) and the ruble is not the reserve currency.  Life is not fair and Western "democracies" have a funding advantage to Russia.  Putin's bugets have been on the rise as he tries to extend Russia's economic influence globally (was Sochi really worth $50B) and Putin's entire economy is massively leveraged to commodity prices.  If the price of oil falls under $100, it will create economic instability in Russia.

Fri, 03/28/2014 - 18:03 | 4603961 Joe A
Joe A's picture

The price of oil will not fall under $100. That was the 'advice' that Soros gave: to use US strategic oil reserves to lower the price of oil. That will piss off OPEC really really badly and they will close the valves to make the price go up again. Russian's economy might be tied to commodity prices but commodities whether they are oil, gas, gold or food is what the world with its ever increasing population size and hunger for luxury wants and needs.

Fri, 03/28/2014 - 18:21 | 4604031 Cursive
Cursive's picture

@Joe A

The price of oil will not fall under $100.

Meet you back here next year for drinks.  Over $100, I'm buying, under $100, you buy.  Now excuse me while I spend the next year watching a few more Chinese companies default, the US "housing miracle" die and the CRB plunge.

Fri, 03/28/2014 - 18:33 | 4604083 Joe A
Joe A's picture

See you in a year!

Sat, 03/29/2014 - 01:55 | 4604970 Offthebeach
Offthebeach's picture

Who would buy Russian Guv debt?

Fri, 03/28/2014 - 16:31 | 4603649 McMolotov
McMolotov's picture

From Cursive's RT article: "The share of the corporate sector accounts for about 90% of the total external debt of the Russian Federation." I don't see Russia picking up the tab for that.

Fri, 03/28/2014 - 16:45 | 4603684 Cursive
Cursive's picture

@McMolotov

To paraphrase the inimitable Boris Alotofkrap (sp?), in Russia, state is economy.  In mother Russia, state is company.

http://www.reuters.com/article/2014/03/11/ukraine-crisis-russia-debt-idUSL6N0M72U720140311

"Elite sanctions, asset freezes and trade restrictions could make it very difficult for Russian banks and corporates to secure external financing and roll over debt liabilities," said Tim Ash from Standard Bank.

KREMLIN CORP BOOSTS DEBT

Russian state foreign debt has fluctuated at around $30-35 billion since 2008, amounting to just 2 percent of GDP.

During the 2008 global financial crisis, it was the heavy external debt of private Russian companies, of around $400 billion, which almost paralysed the economy.

 

Fast forward five years, and the country's total foreign debt rose to $732 billion as of January 1, 2014, from $636 billion a year earlier and $464 billion at the start of 2008, according to the country's central bank, with the bulk of new debt raised by Russian state companies.

Fri, 03/28/2014 - 17:41 | 4603866 RichardParker
RichardParker's picture

How does this compare to debt load of USSA?

Fri, 03/28/2014 - 17:48 | 4603906 Cursive
Cursive's picture

@RichardParker

I compares very favorably on the surface, EXCEPT that the USD is reserve currency of the world (thank you WWII veterans) and Putin's entire ecomony depends on oil staying above par or SHTF in Mother Russia.

Fri, 03/28/2014 - 17:41 | 4603868 Joe A
Joe A's picture

$732 billion foreign debt amounts to the 32.5% external debt to GDP ration in the link I gave you above (Russian's GDP is around 2 trillion $).

Again, when ZH poster talk about Russian debt they talk about Russian government debt, not private companies' debt.

Your quote: "Elite sanctions, asset freezes and trade restrictions could make it very difficult for Russian banks and corporates to secure external financing and roll over debt liabilities," ---> works both ways.

To paraphrase the inimitable Mr Panos: "Greece has a problem? No – you gave Greece the money, you have the problem."

Replace Greece with 'Russian company'.

Russian companies that owe billions go into default. Putins buy them for 1 ruble and creditors get into trouble for not being able to reclaim money. These now Russian state companies then might have trouble getting new loans but the world still needs aluminium, oil, gas, etc. And there are plenty of buyers out there....

Fri, 03/28/2014 - 17:55 | 4603930 Joe A
Joe A's picture

That is 90% of the 32.5% of external debt to GDP ratio that Russias has. Russia's GDP is around 2 trillion $. So 90% of 32.5% of that is company debt.

Russia will not pick up the bill for that. If a company defaults it will be nationalized for little money and creditors can only hope they will retrieve some. Since these are companies that produce aluminium, oil, gas and other resources that the world needs, you'd be surprised to see how many buyers there are. Even from the previous creditors' countries.

Really, listen to Mr Panos. When you lend me small money, I have a problem. When you lend me big money, you have a problem.

Fri, 03/28/2014 - 18:11 | 4603995 McMolotov
McMolotov's picture

Yeah, there's even a Russian Mr. Panos right there in the Reuters article who says, "If they (the West) freeze our assets, then our companies could stop paying foreign debts."

Russia's external debt is minuscule compared to the US, and most of it is corporate debt. Whether or not that corporate debt is tangled up with the state is irrelevant because it simply won't be paid if Russia feels it's being threatened.

Fri, 03/28/2014 - 18:16 | 4604011 Joe A
Joe A's picture

That is right. The debt collectors would need an army to reclaim that money.

Sat, 03/29/2014 - 02:52 | 4605004 Offthebeach
Offthebeach's picture

Not big money world wise.

Oil, mineral extraction is physically tough, expensive buisness. Cat diesel repair parts, pumpThey'ves wear out. Halliburton and technical service companies aren't charities. No payee, no workee, pack up and off to west coast Africa.

Putin Inc has already "nationalized" . Oil company s understand thug national leader company/nations better than thugs. They've been at it for a hundred years. World wide.

Putin starts, as he is, messing with the Rus Family cash flow, he might end on the pavement up out side the Moscow equivalent of Sparks Steak House

Fri, 03/28/2014 - 17:51 | 4603920 Karl von Bahnhof
Karl von Bahnhof's picture

Before you start ranting USA USA and schadenfreude to Putin be advised that Deripaska is joovish oligarch ( although cooperating ) and Rusal is fully tentacled into City of L and tax heavens, so the pain will be not in Putin's ass but smewhere else.

Fri, 03/28/2014 - 16:01 | 4603556 vote_libertaria...
vote_libertarian_party's picture

So the industrial materials exporting nations see a China crash = they crash

 

Russia exports oil, raw materials, etc.   They need a distraction war!!!

Fri, 03/28/2014 - 16:02 | 4603559 BurningFuld
BurningFuld's picture

Was that 10 Billion with a "B"? Just askin'.

Fri, 03/28/2014 - 16:07 | 4603562 Soul Glow
Soul Glow's picture

This is a controlled demolition.  It started in earnest during the Fall of '08.  You are watching the end.

Fri, 03/28/2014 - 16:03 | 4603566 ebworthen
ebworthen's picture

Before sanctions Wall Street and Brussels fucked over markets and economies with their legerdemain and the planned crash.

No reason for Russia or a Russian company to honor debt to a Swiss bank and every reason for them to reclaim Ukraine.

Just because Brussels is engaging in a Blitzkrieg with banks not tanks, doesn't mean Russia can't revert back to tanks.

"This is the 21st Century, what is Putin thinking!?!?"  Um...maybe that the 21st century way is bullshit?

Fri, 03/28/2014 - 16:04 | 4603568 Cupid Stunt
Cupid Stunt's picture

Sucker will be sold for 1 ruble.............carry on nothing to be seen here.

Fri, 03/28/2014 - 16:06 | 4603574 b_thunder
b_thunder's picture

Putin bailed them out in 2008 (with help of Bernank's interbank swap lines), Putil will try the bailout again.

Except now the Fed won't be helping them along

 

Fri, 03/28/2014 - 16:14 | 4603597 LawsofPhysics
LawsofPhysics's picture

< meh > trade trumps all fiat...

You bring up an interesting point though.  As far as debt goes, the Russian government is rather debt-free by comparison to western governments.  However, the private sector in Russia owes the western banks a whole lotta money...

How that saying go again?  If I owe you a dollar, that's my problem, if I owe you a trillion...

Fri, 03/28/2014 - 16:10 | 4603587 LawsofPhysics
LawsofPhysics's picture

Default on what?  Funds owed to American banks or banks in the E.U.?  Not sure I really understand who the "winner" is here.  Was that how that the sanctions were suposed to work?

Fri, 03/28/2014 - 16:24 | 4603628 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Exactly they say fuck you and your paper and just write it off the books and let the American Banks and E.U. whine until they decide to cry uncle to Putin and then the debt is dealt with in another manner that is preferential to Russian interests in general.

As long as someone needs their physical materials they can tell all the paper parasites to suck it and hide behind Putin. Someone will do business with them just won't extend them any credit is all. It will be payment in full upon delivery terms no net 10% or so upfront unless Russia guarantees delivery.

Fri, 03/28/2014 - 16:31 | 4603642 sixsigma cygnus...
sixsigma cygnusatratus's picture

Meanwhile, Russia can trade directly with China for physical goods, and bypass every state (and currency) that has outsourced its production to China, if Putin so desires. 

Fri, 03/28/2014 - 17:09 | 4603763 Whoa Dammit
Whoa Dammit's picture

It would be amusing though to see US or EU bankers try to take possession of an asset located in Russia. 

Fri, 03/28/2014 - 17:32 | 4603830 SAT 800
SAT 800's picture

Amuzing? Well, if you find guts on the doorknob and brains on the windows amuzing, I suppose. Amuzing isn't the first word that occurs to me.

Fri, 03/28/2014 - 16:23 | 4603636 i_call_you_my_base
i_call_you_my_base's picture

Exactly. This may be a threat, not an actual event. I have been thinking about the possibility of that in China too.

Sat, 03/29/2014 - 10:46 | 4605304 lakecity55
lakecity55's picture

I want the deer (BHB) in the headlights photo vs. Vlad driving a tank.

Fri, 03/28/2014 - 16:33 | 4603611 Philalethian
Philalethian's picture

Hold all tickets please.

The pay off is coming, or appears to be forthcoming. Here is some serial blah blah for ya.

http://www.youtube.com/watch?v=mDWZaDKU1R4

Russia may wait till they get this IMF/American pay off via Ukraine's debt, before they invade. What a win win for Russia. Take the land, and the IMF money from American tax payers. Pretty darn good scamery going on in the backgrounds. Everyone is so quick to focus on the main distractions, while missing the sublime corruption and criminality that has no overseer in America any moar.

http://krqe.com/2014/03/27/poc-says-it-lacks-power-to-police-the-police/

Camp town run-a-muck coming soon!

http://intellihub.com/u-s-forces-nuclear-false-flag-high-alert/

Fri, 03/28/2014 - 16:49 | 4603662 Rainman
Rainman's picture

Yeehaw .... Mr. Efficient Market has Rusal shares up 21% this year in Hong Kong HK$ 2.80 per share !

Fri, 03/28/2014 - 16:42 | 4603668 Cacete de Ouro
Cacete de Ouro's picture

A story at bedtime:

Georgie Gideon Osborne hoped that if his friend Oleg defaulted, then it wouldn't affect the parties on the yacht that summer.... "Not to worry", said Oleg, "here comes our old chum Nat Rothschild in an even bigger yacht"...horray! "Now we can have the week in Corfu this summer after all", they squealed with delight....."and lashings of ginger beer" added Georgie... Hurrah!

and they all lived happily ever after.

Fri, 03/28/2014 - 16:43 | 4603689 lasvegaspersona
lasvegaspersona's picture

long aluminum...cans are made of it and cans are for kicking...I see a bright future with increased demand...

Fri, 03/28/2014 - 17:15 | 4603779 Rusty Shorts
Fri, 03/28/2014 - 18:03 | 4603960 Karl von Bahnhof
Karl von Bahnhof's picture

His second naim iz "Gideon" ???

/sounds of diabolic laughter

Fri, 03/28/2014 - 18:11 | 4603997 Cacete de Ouro
Cacete de Ouro's picture

His first name is Gideon actually (he was christened Gideon). He changed his name to George when he was 13. His grandfather was George.

Fri, 03/28/2014 - 16:46 | 4603699 delivered
delivered's picture

The problems this company is facing is no different than many other companies, in a multitude of countries, operating in a variety of industries, from as large as Billions to as small as hundreds of thousands. Everyone has leveraged up from free/cheap/easy money under the context that the world economy will grow at 3+%, evenly, with no speedbumps, roadblocks, or potholes hit. All is well, the Kool-aid worked and the system is balanced.

But clearly this is not the case. Whether it be a metal's company in Russia, coal in China, mining in Australia, retail in the US (think JCP, Sears, and others), the stress that is starting to appear is severe and will eliminte the weak companies first (and has started). A recent chart displaying the spreads between the lowest quality debt and A+ rated debt highlighted this trend as the herd is about to be culled and with it, countless jobs and an unwinding of the collateral chain that will take down more than a few financing companies. This will be a global event as to think that problems in Russia, China, Japan, and Europe will not impact the US is worse than having your head buried in the sand (or up your own ass). Large US based companies a dependent on foreign sales/opportunities to fuel growth. Without this, earnings growth is going to die, and quickly.

But one must remember, a macro level, what has really happened over the past decade. In the lending world, positive cash flow is always looked for first to repay debt. If this isn't available, then the quality/liquidity of the collateral is second in line (as if the borrower can't repay from cash flow, at least the lender can liquate the assets to salvage the debt). Finally, if cash flow and collateral aren't available, well then they look to secondary repayment sources (or for a small business, the dreaded personal guarantee). But for larger businesses/global operations, the only secondary repayment source has been non-other than the world's CB's. This is what it boils down to. The CBs including the Fed, ECB, BoJ, BoE, PBoC, etc. have done nothing but act as a secondary source of repayment for bad debt/loans. Period! 

The world has been hoodwinked into believing that cash flow doesn't matter, that other forms of capital/credit are available, that there will always be another party to bailout the previous SFB deals. It's about to see once again (dot.com implossion in 2000/2001 and MBS/CDO/CLO implossion in 2007/2008) that even the slightest speedbump or pothole (think Russia/Ukraine) can create major heartburn. Junk/garbage debt rates are telling everyone this and as usual, the credit market is well ahead of the equity markets when sending the message. 

 

Fri, 03/28/2014 - 17:21 | 4603797 Whoa Dammit
Whoa Dammit's picture

+100.

Fri, 03/28/2014 - 16:56 | 4603733 RaceToTheBottom
RaceToTheBottom's picture

Isn't there a photo of Putin, bare-chested, riding an ingot of aluminum somewhere around here?

Just what the Putin ManCrush team needs

Fri, 03/28/2014 - 16:59 | 4603738 jopa
jopa's picture

"Deripaska, chief executive, said the company had “gone through a difficult, but important transformation” and predicted resilient demand for aluminium. Rusal has been weighed down by high debts since it spent $14bn to buy a stake in Norilsk Nickel in 2008 just before metals prices tumbled in the financial crisis. It underwent a huge restructuring in 2009, but has remained highly leveraged."

 

Funny footage with putin getting Deripaska to SIGN the "huge restructuring". during thre rusal crisis in 2009 .

 

http://www.dailymotion.com/video/xpdb5f_poutine-juin-2009-pikaliovo-prem...

Fri, 03/28/2014 - 17:08 | 4603762 Soldalma
Soldalma's picture

If you owe 1 million dollars to the bank, it's your problem. If you owe 10 billion dollars to the bank, it's the bank's problem.

Fri, 03/28/2014 - 17:16 | 4603783 buzzsaw99
buzzsaw99's picture

Exactly. If I were them I'd tell the western bankers to suck it (in Russian).

Fri, 03/28/2014 - 17:33 | 4603836 Ban KKiller
Ban KKiller's picture

They have an excellent cooker of books in kmpg, no? Whip up some non GAAP  accounting to go with spicy noodles. 

Noodles next door or out of the pipeline. 

Corrupt would fail if not for crooked accountants....The core of Madoff biz.

Fri, 03/28/2014 - 17:10 | 4603764 F.A. Hayek
F.A. Hayek's picture

Where's Marc Rich when you need him?

Fri, 03/28/2014 - 17:22 | 4603799 Uncle Remus
Uncle Remus's picture

They should look into getting some of that 1 yen coin action.

Fri, 03/28/2014 - 17:22 | 4603800 Philalethian
Philalethian's picture

Casualty?

That would be the usurpers ego as he was stripped of the globalist puppet decor. There is nothing greater, than stripping down the covering fronts of a satanist's ego. Ouch!

http://rt.com/politics/obama-nobel-double-standards-813/

 

 

 

Fri, 03/28/2014 - 18:12 | 4604001 Noob1011
Noob1011's picture

Putin calls Obama

Putin Calls Obama to Discuss Ukraine, White House Says - NYTimes.com
http://www.nytimes.com/2014/03/29/world/europe/putin-calls-obama-on-Ukra...

Fri, 03/28/2014 - 17:36 | 4603847 Satan
Satan's picture

So in one swoop Deripaska gets crushed, Rusal is nationalized for Putin to do with as he pleases and the banks that are owed money, mostly western banks, are asked to kindly go and fuck themselves.

Putin is running circles around everyone...

Fri, 03/28/2014 - 17:49 | 4603913 U4 eee aaa
U4 eee aaa's picture

So does having sanctions mean the fed can't secretly bail out companies like this behind US taxpayer backs?

Fri, 03/28/2014 - 17:57 | 4603938 Lumberjack
Lumberjack's picture

Here is some background on RUSAL. I've been watching this for a couple opf years.

 

http://www.reuters.com/article/2009/12/29/us-rusal-ipo-idUSTRE5BS1F12009...

 

The investors include Nathaniel Rothschild's private investment company; Robert Kuok Hock Nien, the Malaysian-Chinese businessman said to be worth around $10 billion, and Paulson & Co, the New York hedge fund run by billionaire John Paulson.

Fri, 03/28/2014 - 18:00 | 4603945 Lumberjack
Lumberjack's picture

More:

 

http://www.themoscowtimes.com/business/article/rusal-hires-bank-to-value...

 

United Company RusAl hired Bank of America Merrill Lynch to value its 25 percent stake in Norilsk Nickel, a source close to RusAl's shareholders said Wednesday, as pressure grows on the heavily indebted firm to sell.

A RusAl representative confirmed that a committee of the company's board would meet to discuss the matter.

"We view our stake in Norilsk Nickel as a strategic investment, but, as a publicly traded company, we discuss all offers as part of our corporate governance procedures," the representative said.

Norilsk Nickel earlier this month offered to buy back the 25 percent stake from RusAl for $12 billion as it sought to end a long-running dispute between the world's largest nickel and palladium miner's two core shareholders, Vladimir Potanin and Oleg Deripaska.

Potanin's Interros and Deripaska's RusAl each hold about 25 percent of the miner.

The two sides have widely divergent views about the company's strategy and dividend policy, and RusAl in October unsuccessfully sought to dismiss Norilsk Nickel's board at an extraordinary shareholders meeting.

A third billionaire, Mikhail Prokhorov, who holds 17 percent of RusAl, said earlier this week that he believes that the world's largest aluminum producer will unload its Norilsk stake for $12 billion to $15 billion.

Fri, 03/28/2014 - 18:11 | 4603994 Karl von Bahnhof
Karl von Bahnhof's picture

HahahahA, the fuckerz getting anally fisted

/sad sabbath

Fri, 03/28/2014 - 18:47 | 4604143 rosiescenario
rosiescenario's picture

In Russia the criminals are the government; in the U.S. they use lobbyists

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