HONG KONG/MOSCOW, Dec 7 - Russia's UC RUSAL will delay its $2 billion share flotation to 2010 after the Hong Kong bourse asked the world's top aluminium maker to meet conditions before its main owner can tap the market to service debts.

The delay puts Russian industrialist Oleg Deripaska and Rusal's IPO plans on the back foot once more after a breakthrough last week when it clinched a landmark $17 billion debt restructuring deal with creditors.

Support from the Russian state, which confirmed on Monday it was prepared to buy around a third of the IPO in which RUSAL would list 10 percent of its stock, did not persuade the Chinese bourse to give the final nod.

Based on the company-provided information, the listing committee has not approved the deal ... until the firm can fulfil some conditions, said a source close to the deal.

He declined to say what the conditions were, but said they would not be easy to solve in a few days.

UC RUSAL, controlled by Deripaska, wants to float to pay down more of its debt pile, which it built up in a borrowing spree ahead of a collapse in aluminium prices last year.

The delay is the latest setback for IPO plans by a company in Europe, where the market for company flotations remains lacklustre compared with some other regions. Earlier this month German builder Hochtief AG (HOTG.DE) pulled the IPO of its Concessions unit, though some IPOs have succeeded.


A source with direct knowledge of the matter said RUSAL continued its dialogue with the Hong Kong Stock Exchange but could not say when it would meet the bourse again.

RUSAL is not in a rush to do an IPO this year given that the situation on the aluminium market is improving considerably, providing better terms for valuation and pricing, the source said, adding the IPO could take place in the first quarter.

Deripaska, once ranked Russia's richest man, built UC RUSAL into the world's largest aluminium producer before the economic crisis wiped 60 percent off the value of the metal and left the company struggling to service its debts.

Svetlana Borodina, head of Russia and CIS corporate governance ratings at Standard & Poors, said investors could view key risks for RUSAL's IPO as including the long-term volatility in aluminium prices, the complex structure of Deripaska's Basic Element investment vehicle and a legal suit against him in London.

Michael Cherney, a former associate of Deripaska, is suing him for 2 billion pounds in damages in the UK High Court -- an action that the judge has described as having a reasonable prospect of success.

Investors like hedge funds are often looking not only at fundamentals but also on news around the company. Emotionally that (Cherney) suit could have an impact, Borodina said. It is a question of discount and reputation.

The head of Russian banking agent VEB, Vladimir Dmitriyev, said on Monday it could have up to $670 million to spend on UC RUSAL's share offering and played down legal risks from the Cherney case.

Had the listing been approved, the IPO roadshow would have begun on Tuesday. Analysts have said any further delay would likely postpone the IPO into March due to Russian holidays in January. (Additional reporting Michael Flaherty; Writing by John Bowker and Dmitry Zhdannikov in Moscow; Editing by John Stonestreet and David Holmes)