Russia's Mechel seals debt restructuring deal with VTB
10 September 2015
Russian coal and steel producer Mechel has signed a debt restructuring deal with the country's second-largest state bank, VTB, leaving it one step away from reaching an agreement with all three of its main lenders.
The indebted miner has spent a year in talks over a $6.8-billion debt restructuring with its three main lenders: VTB, Gazprombank and Sberbank.
VTB has agreed to restructure Mechel debt worth 70 billion roubles ($1 billion), the bank and the miner said on Wednesday.
Mechel, which employs 72,000 people, had to ask its lenders to delay debt repayments after Russia's economic downturn and a decline in coal and steel prices put an end to its strategy of borrowing heavily to finance large investments.
The restructuring will also allow VTB to cut costs on loan-loss provisions for Mechel's debt at a time when the bank's profits have slumped.
"This restructuring will enable the company to service its debt even in these times, which are difficult for the global commodity market," Igor Zyuzin, Mechel's board chairman and controlling shareholder, said in a statement.
The restructuring agreement gives Mechel a grace period on debt repayments to VTB until April 2017 and states that subsequent loan repayments will follow in monthly installments until April 2020, VTB and Mechel added.
In late August, Mechel signed a similar debt-restructuring deal worth $1.4 billion and 33.7 billion roubles ($506 million) with Gazprombank.
The company is still in talks with Sberbank, Russia's largest lender, to which it owed $1.3 billion as of mid-June.
Sberbank said on Wednesday it was yet to agree terms with Mechel over its outstanding debt and was continuing legal proceedings to recover money it is owed.