August 15, 2019 / 3:47 PM / 4 days ago

UPDATE 1-Russia's Mechel requests more time to repay its debts

(Updates with confirmations from state banks, analyst comment)

MOSCOW, Aug 15 (Reuters) - Russian coal and steel producer Mechel has asked state-controlled lenders Sberbank , VTB and Gazprombank for more time to make its debt repayments, the banks and company said on Thursday.

Mechel, which had already postponed debt repayments to 2020-2022 following lengthy restructuring talks with Russian state banks earlier this year, is now asking to push payments back to 2024-2026, an executive at Sberbank, one of its key lenders, said.

The company’s first-half results published on Thursday showed it still has net debt of 411 billion roubles ($6.21 billion) excluding fines and penalties, though that was down 12 billion roubles year-on-year.

“Sberbank will consider the question on restructuring after an analysis of the company’s financial model,” Sberbank’s deputy board chairman Anatoly Popov said in a statement.

Mechel’s other key lenders, Gazprombank and VTB, also told Reuters on Thursday they had received and were considering Mechel’s request for a postponement.

“We are approaching the period of our main debt’s maturity in accordance with loan agreements we made with lender banks in 2016,” Mechel chief executive Oleg Korzhov said in a statement.

But Korzhov said the company’s cash flow was not sufficient to fulfil all its 2020-2022 debt repayment obligations, though cash flow did meet the company’s current capital expenditure and debt servicing needs.

“We have accordingly called on our lenders with an offer on moving the debt maturity to a later period. The banks are now considering our offer, and we expect to reach an agreement on this issue in the near future,” Korzhov said.

Mechel declined to comment on the proposed timeframe of the postponement but said it was expecting to reach an agreement on the matter in the near future.

The company’s shares on the Moscow exchange were trading down 3.6% at 1456 GMT.

Mechel, controlled by Russian businessman Igor Zyuzin, borrowed extensively during the commodities boom in the 2000s. Its lengthy restructuring following the 2008 financial crisis was exacerbated by Russia’s economic crisis in 2014.

In April 2017, Russia’s three largest state banks confirmed a restructuring of $5.1 billion of the company’s more than $6 billion debt. Mechel’s net debt to EBITDA ratio now stands at 6.4 times.

“The deterioration of Mechel’s financial position is directly related to price declines in the market for thermal coal,” Maxim Khudalov, an analyst at the ACRA rating agency, said.

Thursday’s interim results showed that Mechel’s net profit in the second quarter stood at 1.4 billion roubles, compared to 11.34 billion roubles in the previous quarter.

Coking coal sales in the second quarter were up 13% at 1.9 million tonnes compared to the previous three months, while steel production rose to 932,000 tonnes from 930,000 tonnes, the company said. ($1 = 66.2276 roubles) (Reporting by Anastasia Lyrchikova and Tatiana Voronova; Writing by Polina Ivanova; Editing by Jane Merriman and Jan Harvey)

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