Russian mining company
) has reached an agreement with its creditor Sberbank of Russia
on covenant holidays on bilateral credit lines worth roughly RUB
44.9 billion ($1.36 billion) until the end of 2014.
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 on Mechel and Sberbank's mutually
beneficial and efficient partnership.
On Dec 4, 2013, Mechel had reached an agreement with its creditor
VTB Bank on covenant holidays on bilateral credit lines worth
$1.8 billion until the end of 2014.
Mechel has established itself as a vibrant and resilient company
under all market situations. The company has the potential to
undergo current asset restructuring program and for that purpose
VTB is willing to extend its support such that the new step will
consolidate into a mutually beneficial partnership between the
two. Covenant holidays provided by VTB Bank will help Mechel in
its debt optimization process.
On Nov 25, Mechel reached another agreement with its creditors on
covenant holidays for its $1 billion loan until the end of 2014.
The agreement was inked on behalf of a syndicate of banks,
including ING Bank N.V., Societe Generale, UniCredit,
Commerzbank, Raiffeissen Bank International, VTB, Caterpillar
Financial Services Corporation and ICBC (London).
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, Mechel could be jeopardized because
of its high debt and interest burden, and might not be able to
keep up with its huge capital spending program.
Mechel's position is doubtful as far as debt is concerned,
since the debt on its books (roughly $9.3 billion as of Mar 31,
2013) is more than seven times of its market capitalization. The
company has significant debt repayments (of $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 further financing.
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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