Russian Tycoons Plan State-Backed Metals Giant

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"The state, in exchange for a stake in the company, could write off the debts of each company's owners and contribute its 60% stake in the world's largest titanium maker. . ."

Two Russian metals billionaires have proposed the creation of a mining giant part-owned by the Kremlin that would wipe out existing debts and rival the world's top miners, a spokeswoman for Vladimir Potanin said on Monday.

Potanin and Oleg Deripaska, who both own stakes in Norilsk Nickel, plan to invite other companies to swap some of their debt to the state for a stake in a much larger company. Analysts were skeptical such a complex scheme could work.

"We are preparing proposals on swapping debt for a stake in a big company—a Russian BHP Billiton," said Larisa Zelkova, spokeswoman for Potanin's company, Interros. She declined to give more details. Russia's steel and mining giants, which enjoyed record profits as commodity prices boomed, were left exposed to massive debt repayments as the global financial crisis reversed demand. Many have refinanced their loans with state-owned banks.

The proposed national company, in which the state could take a blocking stake of at least 25% plus one share, would be formed by merging Norilsk, the world's largest nickel miner, with several steel makers, Vedomosti Business daily reported.

The state, in exchange for a stake in the company, could write off the debts of each company's owners and contribute its 60% stake in the world's largest titanium maker, VSMPO-Avisma.

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