September 8, 2009 / 5:40 PM / 10 years ago

UPDATE 1-Russia supplies loan guarantees to Metalloinvest

* State guarantees nearly $1 bln in loans

* Company says to be used as collateral on VTB credit line

(Adds details from Metalloinvest statement)

MOSCOW, Sept 8 (Reuters) - Russia pledged on Tuesday to underwrite nearly $1 billion in loans that state-owned bank VTB (VTBR.MM) has agreed to supply to Metalloinvest, the iron and steel company controlled by billionaire Alisher Usmanov.

The government said in a statement it would act as guarantor for 30.75 billion roubles ($978.6 million) that VTB is lending to four Metalloinvest units. The decision was taken by a commission chaired by First Deputy Prime Minister Igor Shuvalov.

“The state guarantees will be used as collateral for a credit line from VTB, which had already been agreed in principle,” Metalloinvest said in a separate statement.

Russia’s largest iron ore miner and No. 5 steel maker, secured an undisclosed loan from VTB in August that it said at the time would help refinance its debt to another state-controlled lender, Sberbank SBER03.MM. [nLI378119]

On Tuesday, the company said its units had made scheduled payments to Sberbank at the end of August, with one of the units fully repaying its debts.

Metalloinvest said it would use the VTB credit line to finance production and investments at its iron mines and steel mills, tapping the funds as necessary over several years.

Steel makers in Russia, the world’s fourth-largest producer, accumulated debts in excess of $30 billion expanding their businesses before the world economic slowdown slashed demand for their products from the construction and automotive sectors.

The government said Metalloinvest’s two iron ore-mining units, Lebedinsky GOK and Mikhailovsky GOK, would each receive state guarantees worth 10 billion roubles on the VTB loans.

The Oskol Electrometallurgical Plant would be covered for 6.25 billion roubles and Ural Steel for 4.5 billion roubles, it said.

(Reporting by Robin Paxton and Toni Vorobyova; Editing by David Cowell and Elaine Hardcastle)

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