OAO Mechel (MTL), Russia’s biggest producer of steelmaking coal, is discussing options with state banks to enable the mining company to meet debt obligations, according to two people with knowledge of the matter.
The company is in talks with its three biggest creditors -- OAO Gazprombank, OAO Sberbank (SBER) and VTB Bank (VTBR) -- and government officials on issuing about 180 billion rubles ($5.2 billion) in Mechel (MTLR) shares or bonds convertible into its stock, the people said, asking not to be identified because the discussions are private.
Another option under discussion is for Vnesheconombank, the state development lender, to buy Mechel shares or bonds rather than the creditor banks, the people said. The state banks may provide a 35 billion-ruble bridging loan to assist the company before a final decision on the broader aid is taken, according to Kommersant newspaper, which reported the plan earlier today.
Mechel, which employs about 70,000 people, is among Russia’s most-indebted mining companies, with liabilities of about $9 billion. Like its global peers, Mechel has been confronted by falling prices for coking coal as demand for the raw material from steelmakers is weakened by slower economic growth. Its stock has dropped about 40 percent in Moscow in the past year.
Details of the financing plan may be discussed at a government meeting tomorrow, the people said. The press services of Mechel, VTB, Sberbank and Vnesheconombank declined to comment. Gazprombank didn’t immediately respond to requests for comment.
Mechel negotiated waivers on loan deadlines from Russian and international lenders in December, on top of being allowed in November to breach some debt terms. The Moscow-based company had $1.07 billion of debt due this year as of May 14.
Should the banks agree to acquire shares in exchange for providing credit, billionaire Chairman Igor Zyuzin’s stake in the company may fall to as low as 10 percent from 67.42 percent, according to Kommersant.
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