Mechel Wins Grace Period on $1 Billion Loan From Foreign Lenders

OAO Mechel, the Russian coal producer with about $9.55 billion in net debt as of June, won a waiver from a group of banks to delay payments on a $1 billion loan until 2015 and 2016.

Talks on the grace period were completed with lenders including ING Bank NV, Societe Generale SA and UniCredit SpA as well as VTB Group, according to a statement from Mechel. The payments, amounting to about $600 million, had been scheduled for this year and next. Last month, the company agreed with the banks on covenant holidays for the same loan.

Russia’s largest producer of coking coal for steelmakers, controlled by billionaire Igor Zyuzin, is among the country’s most indebted mining companies, with the ratio of net debt to earnings before interest, taxes, depreciation and amortization at about 10.9 times in the first quarter.

The agreements take some pressure off the coal maker, which may need to buy back as much as 15 billion rubles ($451 million) of bonds in January and February under a put option, data compiled by Bloomberg show.

“We’re sure that we’ll have sufficient funds to handle the option because of planned assets sales and operating cash-flow,” Chief Financial Officer Stanislav Ploschenko said today in an e-mailed response to questions.

The company is holding talks about covenant holidays with a number of lenders, he said. Russia’s VTB Group, OAO Sberbank and OAO Gazprombank account for about 58 percent of Mechel (MTLR)’s debt, according to the company’s annual report.

Mechel fell a record 41 percent in one day on Nov. 13 on speculation that it may face a default. The shares have declined further since then, trading down 1.9 percent at 56.70 rubles by 5:08 p.m. in Moscow, which would be the lowest close since at least 2008 on the benchmark Micex exchange.

Zyuzin boosted the stake he has pledged for personal loans to 59.4 percent from about 50 percent in July, according to regulatory filings dated Nov. 29.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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