Russian mining company
) has entered into agreements with its creditor Sberbank of
Russia to restructure part of its debt to the bank (RUB 25.5
billion or $773 million). The agreements extend the obligation of
Mechel to Sberbank by 5 years, with a grace period until the
first quarter of 2015.
The conditions of restructuring will guarantee refinancing of
Mechel's existing debt to Sberbank for a total of RUB 25.5
billion. The restructuring activities will be executed only on
Mechel's short-term debt, which were maturing within Dec 2013 to
Dec 2014. As Mechel's existing debt is being restructured, its
total debt portfolio will not increase.
This agreement, together with the earlier declared approval of
covenant holidays by Sberbank on bilateral credit lines worth
roughly RUB 44.9 billion ($1.36 billion) until the end of 2014 on
Dec 9, 2013, will enable Mechel to stabilize its financial
The agreement benefits Mechel's revised development strategy,
which includes a gradual decrease of debt burden. It will also
help Mechel to overcome the period of global market volatility.
The agreement reflects the success of Mechel and Sberbank's
mutually beneficial and efficient partnership.
Mechel is a prominent player in the steel industry along with
). The company is a leading domestic steel and coal producer with
strong position in key businesses including production of
specialty steel and alloys. It has the largest coal reserve base
in Russia and is mainly focused on growth and cost-cutting
Mechel owns and controls essential infrastructure; including
ports, rolling stock and power plants; which provide access to
the export markets. However, high debt and interest burden may
affect Mechel, and it might not be able to support its huge
capital spending program.
Mechel's debt position is threatened by uncertainties, since
the debt on its books (roughly $9.3 billion as of Mar 31, 2013)
is more than seven times its market capitalization. The company
made significant debt repayments ($2.2 billion) in 2013. Higher
debt results in greater interest charge. Moreover, a high
leverage restricts the company's ability to raise new debt for
Mechel currently carries a Zacks Rank #3 (Hold).
Other companies in the steel industry with a favorable Zacks
Companhia Siderurgica Nacional
United States Steel Corp.
). While Companhia Siderurgica holds a Zacks Rank #1 (Strong
Buy), United States Steel has a Zacks Rank #2 (Buy).
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