ALROSA Finance S.A. Incorporated As a Socie´Te´ Anonyme with Limited Liability in Luxembourg US$300,000,000 8.875 Per Cent
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ALROSA Finance S.A. incorporated as a socie´te´ anonyme with limited liability in Luxembourg US$300,000,000 8.875 per cent. Notes due 2014 Unconditionally and irrevocably guaranteed by ALROSA Company Limited incorporated in the Russian Federation Issue Price: 99.511 per cent. ALROSA Finance S.A. (the ‘‘Issuer’’), a private company incorporated with limited liability under the laws of the Grand Duchy of Luxembourg (‘‘Luxembourg’’) and a wholly owned subsidiary of Alrosa Finance B.V., a private company incorporated with limited liability under the laws of The Netherlands, wholly owned by ALROSA Company Limited (‘‘ALROSA Ltd.’’ or the ‘‘Guarantor’’), a closed joint stock company organised under the laws of the Russian Federation (‘‘Russia’’), with the alternate legal name AK ‘‘ALROSA’’ (ZAO), is issuing the US$300,000,000 8.875 per cent. Notes due 2014 (the ‘‘Notes’’). The Issuer and ALROSA Ltd. will enter into a loan agreement to be dated 16 November 2004 (the ‘‘Intercompany Loan’’) pursuant to which the Issuer will lend the net proceeds of the offering of the Notes, equal to US$295,983,000 (after payment of commissions), to ALROSA Ltd., and ALROSA Ltd. will agree to repay an amount equal to the aggregate principal amount of the Notes. The Notes will mature on 17 November 2014. Interest on the Notes will be payable semi-annually in arrear on 17 May and 17 November of each year, commencing on 17 May 2005, at the rate of 8.875 per cent. per annum. Payments on the Notes will be made free and clear of, and without withholding or deduction for or on account of, any taxes imposed by Luxembourg, The Netherlands or Russia, to the extent described under Condition 9 ‘‘Taxation’’ in ‘‘Terms and Conditions of the Notes’’. Except in certain limited circumstances, the Notes are not redeemable prior to 17 November 2014 (the ‘‘Maturity Date’’). The Notes will be general unsecured and unsubordinated obligations of the Issuer, and will rank senior to all future subordinated obligations and equal to all future unsecured obligations of the Issuer. The Notes will be constituted by a trust deed to be dated 16 November 2004 (the ‘‘Trust Deed’’) between the Issuer, ALROSA Ltd., and J.P. Morgan Corporate Trustee Services Limited (the ‘‘Trustee’’), and will be unconditionally and irrevocably guaranteed by ALROSA Ltd. (the ‘‘Guarantee’’). This Guarantee will be unsecured indebtedness of ALROSA Ltd. and will rank senior to all future subordinated obligations and equal to all future unsecured obligations of ALROSA Ltd. The Notes are limited recourse obligations of the Issuer. Where principal, interest and additional amounts, if any, are stated to be payable in respect of the Notes, the obligation of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders, on each date upon which such principal, interest and additional amounts, if any, are due in respect of the Notes, for an amount equivalent to all principal, interest and additional amounts, if any, actually received by or for the account of the Issuer pursuant to the Intercompany Loan. The Issuer will have no other financial obligation under the Notes. Accordingly, holders of the Notes will be deemed to have accepted and agreed that they must rely solely and exclusively on the credit and financial standing of ALROSA Ltd. in respect of the financial servicing of the Notes. References to ‘‘we’’ and ‘‘us’’ in this offering circular (this ‘‘Offering Circular’’) refer collectively to ALROSA Ltd. and its consolidated subsidiaries, including the Issuer. Application has been made to list the Notes on the Luxembourg Stock Exchange. Application has also been made for the Notes represented by the Rule 144A Global Note (as defined below) to be designated as eligible for trading on The Portal Market of the NASDAQ Stock Market, Inc. (‘‘PORTAL’’). An investment in the Notes involves a high degree of risk. See ‘‘Risk Factors’’ beginning on page 23. The Notes and the Guarantee (collectively, the ‘‘Securities’’) have not been, and will not be, registered under the US Securities Act of 1933 (the ‘‘Securities Act’’) or under any securities laws of any other jurisdiction. The Notes are being offered and sold outside the United States in offshore transactions in reliance on Regulation S under the Securities Act (‘‘Regulation S’’) and in the United States to ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the Securities Act (‘‘Rule 144A’’)) in reliance on Rule 144A. The Issuer has not been and will not be registered under the Investment Company Act of 1940 (the ‘‘Investment Company Act’’). All Notes will be in registered form, without coupons. The Notes are being issued pursuant to exemptions from registration under the Securities Act. Notes that are sold to qualified institutional buyers within the meaning of Rule 144A will be represented by interests in a global registered Note (the ‘‘Rule 144A Global Note’’), deposited with a custodian for, and registered in the name of a nominee for, The Depository Trust Company (‘‘DTC’’) on or about 16 November 2004 (the ‘‘Closing Date’’). Notes that are sold in transactions outside the United States in reliance on Regulation S will be represented by interests in a global registered Note (the ‘‘Regulation S Global Note’’), deposited with a common depositary for, and registered in the name of a nominee for, Euroclear Bank S.A./N.V. as operator of the Euroclear System (‘‘Euroclear’’) and Clearstream Banking, socie´te´ anonyme (‘‘Clearstream, Luxembourg’’). The Notes have been assigned a preliminary rating of B2 by Moody’s Investor Service, Inc. (‘‘Moody’s’’) and B by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’). These ratings address the Issuer’s ability to make interest and principal payments in accordance with the terms and conditions of the Notes (the ‘‘Terms and Conditions’’). The Guarantor has been assigned a senior implied rating of B1 by Moody’s and a credit rating of B/Stable by S&P. A rating is not a recommendation to buy, sell or hold the Notes and may be subject to suspension, reduction or withdrawal at any time by Moody’s or S&P, as applicable. A suspension, reduction or withdrawal of the rating assigned to the Notes may adversely affect the market price of the Notes. Joint Lead Managers and Joint Bookrunners JPMorgan ING Financial Markets Co-Managers Barclays Capital Web-invest Bank 11 November 2004 Table of Contents Limitation on Enforcement of Civil Liabilities.................................................................. 5 Cautionary Statement regarding Forward-Looking Statements ..................................... 6 Presentation of Financial Information .............................................................................. 8 Currencies and Exchange Rates......................................................................................... 9 Summary ............................................................................................................................. 11 Risk Factors ......................................................................................................................... 23 Use of Proceeds .................................................................................................................. 50 Issuer of the Notes ............................................................................................................. 51 Capitalisation ...................................................................................................................... 52 Selected Financial Information.......................................................................................... 54 Management’s Discussion and Analysis of Financial Condition and Results of Operations....................................................................................................................... 57 Our Business........................................................................................................................ 102 Management and Employees ............................................................................................ 144 Principal Shareholders........................................................................................................ 152 Certain Transactions with Related Parties ........................................................................ 153 Description of Existing Material Agreements................................................................... 155 Subsidiaries ......................................................................................................................... 161 Terms and Conditions of the Notes .................................................................................. 164 Summary of the Provisions Relating to the Notes in Global Form ................................. 193 Taxation .............................................................................................................................. 199 Plan of Distribution............................................................................................................ 204 Transfer Restrictions ........................................................................................................... 209 Independent Accountants.................................................................................................. 211 Legal Matters...................................................................................................................... 211 Industry Overview