TMK Sells $137 Million Stake to VTB Bank to Cut Pipemaker's Debt

  • Pipemaker's shares will be delivered to Russian lender in 2016
  • Company will have right to repurchase shares from VTB Bank

TMK PJSC, Russia’s largest pipe producer for the oil and gas industry, will sell 10 billion rubles ($137 million) of shares to VTB Bank to cut its debt burden.

As a part of the deal, TMK has already sold 8 percent of stock held in treasury, Strategy and Business Development Vice-President Vladimir Shmatovich said on a conference call with reporters after the announcement Wednesday. The rest of the shares will be delivered to the lender in 2016.

TMK’s profit was hurt this year as oil prices declined and drilling in the U.S. slowed. The company plans to reduce the ratio of net debt to earnings before interest, taxes, depreciation and amortization to 2.5 next year from 3.73 as of the end of September. Its total debt was $2.83 billion at the end of the third quarter.

TMK will have the right to repurchase the stake within several years after the sale, Shmatovich said, without elaborating on the total size of the stake that VTB may get. A 16 percent share of the company is worth about 10 billion rubles, using yesterday’s closing prices in London and Moscow. The stock declined 1 percent to 61.20 rubles at 11:15 a.m. in Moscow.

TMK last year was considering an initial public offering of shares in its U.S. unit to cut debt as funding costs rose amid the crisis in Ukraine. It sold a 5.48 percent stake to Rusnano State Corp. in January.

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