Mechel Fails to Get Minority Owners' Consent for Debt Deal

  • Less than half of minority shareholders voted on restructuring
  • Mechel is prepared to call new meeting, CEO says before tally

Mechel OJSC failed to get enough votes from its minority shareholders for a $5 billion debt-restructuring plan, and lift the threat of bankruptcy hanging over the Russian steel and coal producer.

Turnout among minority investors at a meeting in Moscow on Friday was less than the 50 percent minimum needed to approve the deal with Mechel’s lenders, according to the company registrar. The shares slumped as much 22 percent, the biggest intraday slump in a year, and were down 7.4 percent by 5:29 p.m. in Moscow.

Mechel will continue to work toward approval and call another vote, possibly in May, Chief Executive Officer Oleg Korzhov said at the meeting. Not all foreign investors were able to cast ballots because of changes in legislation for holders of American depositary receipts. About 80 to 85 percent of the owners of ordinary Russian shares took part, Korzhov said. ADRs make up about two-thirds of the free float, Mechel’s press service said.

Mechel has been trying to alter its terms of borrowing since 2014 following a slump in coal prices. Sberbank PJSC, owed about $1.3 billion by the miner, was the last major lender to approve, on a preliminary basis, a restructuring. VTB agreed in September after Gazprombank altered the terms on $2 billion of debt in August. A group of foreign lenders owed about $1 billion also agreed to restructure the debt, Mechel said last month.

The $5 billion of debt represents 80 percent of Mechel’s total liabilities to the lenders and its maturity would be extended to 2020, the company said in a presentation in February.

Russia’s central bank changed voting rules for depository receipt holders in August. They require depository banks to give a company’s registrar information on the owners that isn’t always easily available. Bank of Russia First Deputy Governor Sergey Shvetsov acknowledged that companies overseas don’t always have the necessary information so regulations should be eased, according to comments he made to Interfax in February.

Mechel hopes to get minority owners’ consent in the next vote and will work closely with holders of ADRs to help them take part as the deal with banks is good for the company, Korzhov said. The chances that the company will get approval from the investors in the next vote are quite high, said Oleg Petropavlovskiy, an analyst at BCS Global Markets.

Before it's here, it's on the Bloomberg Terminal.