MOSCOW--OAO Mechel (MTL), a Russian metals and mining company
that borrowed heavily to expand just as the global economy tanked,
has struck a deal with its creditors to ease its $7 billion debt
burden, three people with knowledge of the deal said Monday.
VTB Group, Russia's state-controlled bank, agreed late Friday to
waive credit covenants and to extend repayment on part of the debt,
they said. They declined to reveal the exact terms of the
agreement.
The lender was appointed by smaller creditors to negotiate the
deal, which is subject to the approval by their credit committees.
The talks are expected to be concluded by the end of the month,
said Mechel's spokesman, Arseny Palagin.
The New York-listed company controlled by a billionaire Igor
Zyuzin found itself deep in debt and short of cash when the market
for metals and coal shrank as the 2008 financial crisis put a brake
on the global economy.
The company reduced its debt service in 2014 and 2015 by
borrowing 1.3 billion from VTB and $1 billion from Gazprombank
earlier this year. But last month, hit by a deepening slump in
Russian industrial production, Mechel applied for covenant holidays
and a debt restructuring.
A holiday usually implies that for an agreed period the lenders
won't demand an early repayment of the debt if some of the
company's finances fall below specified levels. The borrower
usually assumes higher overall interest payment on the loan in
return.
Russia's central bank said late Friday that it was once again
accepting Mechel bonds as collateral for financial transactions, a
day after it cut the company from its list of eligible borrowers.
Mechel shares, which are traded on the New York Stock Exchange,
fell 40% Wednesday, but have recovered somewhat since then.
The company has lost about a third of its value so far this
month. Shares in Mechel rose 6.2% Monday to RUB74.9 in Moscow.
Mechel debt stood at $9.55 billion as of June 1. The figure
includes bonds, financial lease and some non-negotiable parts of
loans.
Before Friday's deal, Mechel was slated to pay $2.5 billion next
year and another $2.3 billion in 2015.
Write to Alexander Kolyandr at alexander.kolyandr@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires