Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Russian coal and steel producer Mechel said that talks with banks on restructuring a $1 billion syndicated loan had concluded successfully.
Mechel, which is controlled by businessman Igor Zyuzin and came close to bankruptcy last year, had circulated the final draft of a restructuring proposal among its creditors last week. It needed the support of at least 75 per cent of the loan holders – a pre-export facility (PXF) – for the deal to go ahead.
“Mechel has obtained the agreement of over 75 per cent by value and the majority in number of the PXF facilities’ participants to implement the restructuring of such facilities,” the company said in a statement.
The restructuring would include extending the loan’s final maturity to the first quarter of 2022 and reducing the interest rate to the level of LIBOR + 3.5 per cent annual interest with the possibility of bringing it down further to LIBOR + 3 per cent annual interest.
In November, Mechel said a number of international holders of its $1 billion syndicated pre-export finance loan had sold their stakes and that the company was in negotiations with new creditors about a restructuring deal.
It is the final stage in a series of painful restructuring deals the company has had to negotiate in recent years.
Mechel and its creditors plan to sign the restructuring documents in the first quarter of 2018.
“We are deeply grateful to the syndicate of international banks that a mutually acceptable decision on restructuring this loan was found after several years of intensive negotiations,” Mechel Chief Executive, Oleg Korzhov, said in the statement.
“This level of support — over 75 per cent — is sufficient for the legal restructuring procedure. However, we will continue our talks in the hope that soon the restructuring plan will win the approval of all creditors.”
Mechel recovered from the brink of bankruptcy last year with the support of Russia’s three largest state-controlled banks Sberbank, VTB and Gazprombank.
Chief Financial Officer Sergey Rezontov, who was involved throughout the restructuring process, has decided to step down for personal reasons, Mechel said in a separate statement last Friday.
Higher coal and steel prices have supported Mechel’s revenues this year, boosting its standing in the negotiations.
Its net debt, excluding fines and penalties on overdue amounts, totalled $7.9 billion at the end of September, broadly unchanged from the start of 2017.
Reporting by Polina Devitt; Writing by Andrey Ostroukh, Polina Devitt and Polina Ivanova; Editing by Susan Fenton.
