OAO Mechel (MTLR), the Russian coal producer with about $9.55 billion in net debt as of June, won a waiver from banks of any tests that it’s meeting the terms of a loan, enabling the company to avoid a technical default.
A group of lenders agreed to free the company of covenant tests on a $1 billion loan until the end on 2014, Moscow-based Mechel said in a statement today. ING Bank NV, Societe Generale SA, UniCredit SpA, Commerzbank AG, Raiffeissen Bank International AG, VTB, Caterpillar Financial Services Corporation and ICBC Plc are among banks to sign the agreement.
The largest Russian producer of coking coal for steelmakers, controlled by billionaire Igor Zyuzin, is among the country’s most indebted mining companies. Certain Mechel loan covenants require it to achieve net debt of no more than 7.5 times earnings before interest, taxes, depreciation and amortization by the end of 2013, while the first-quarter ratio was 10.9 times, ING said in a report this month. The company delayed publication of its first-half financial results.
“Obtaining covenant holidays from the pool of international lenders in such difficult market circumstances and in a short period of time is a major milestone in our debt refinancing process and a clear acknowledgment by leading financial institutions of our successful efforts aimed at asset restructuring,” Chief Financial Officer Stanislav Ploschenko said in today’s statement.
Mechel shares slumped 41 percent to 57 rubles by the close in Moscow on Nov. 13, their biggest decline since at least 2008 amid speculation that the company may not be able to make debt repayments. The stock was 2 percent lower at 67.8 rubles at 5:37 p.m.
Mechel is seeking new covenants for 2014 and 2015 and asking banks to require a net-debt-to-Ebitda ratio of 10 times by the end of 2014 and as much as 6 by the end of 2015, Vedomosti reported this month.
Prime Minister Dmitry Medvedev is meeting executives from Russia’s largest metal and mining companies today, including Zyuzin, for talks on steps to support the industry amid slumping commodities and stock prices.
The government is ready to discuss some compensation to the companies for interest-rate costs they incur in funding development projects, according to plans for the meeting, seen by Bloomberg. It also may consider granting state guarantees for loans and easing rules on the central bank accepting the companies’ bonds as collateral.
Such measures may be useful for Mechel, which still needs to refinance a portion of its debt, George Buzhenitsa, a Moscow-based Deutsche Bank AG analyst, said by phone.
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