Mechel, Gazprombank proposing to convert group's forex debt to rubles, 10-yr refinancing
Interfax Russia & CIS Energy Daily
Mechel (MOEX: MTLR) and its biggest creditor, Gazprombank (MOEX: GZPR) have proposed a new plan to restructure and refinance the debt of the Russian steel and coal company to its other two major creditors, state banks Sberbank (MOEX: SBER) and VTB (MOEX: VTBR).
The proposal involves refinancing most of the company's debt and converting the foreign currency debt into rubles, business daily Vedomosti reported on Thursday.
Gazprombank and Mechel are proposing to convert current debt into rubles and refinancing it for a period of up to ten years, the paper reported one source as saying. Another element of the plan is to issue convertible ruble bonds, for which the company's capital would be increased fourfold.
A source at one of the creditor banks said this could involve 23 billion-27 billion rubles, while a source at another bank mentioned 25 billion rubles. Mechel could use the proceeds to extend a loan to its principal owner and chairman Igor Zyuzin, who would use it to buy up new shares amounting to 75% of increased charter capital, one of the paper's source said. Zyuzin is then prepared to offer these shares as security on the bonds, the source said. The bonds could be converted into shares if Mechel fails to meet its obligations on them.
In addition, the main creditors could get an option to buy 30% of increased equity from Zyuzin with a restriction on sale for five years, as well as financial control, a source close to one of the parties in the negotiations said. Mechel and Gazprombank are prepared to discuss the details and conditions, another source said.
VTB, Gazprombank and Sberbank hold more than half of Mechel's debt, which totalled $6.9 billion as of December 1.
A spokesman for Mechel declined to comment on this information. Representatives of Gazprombank and Sberbank did not respond to questions, the paper said.
The new share issue must be approved by 50% of disinterested shareholders, who hold 32.58% of shares in the company, a partner at law firm Goltsblat BLP, Matvei Kaploukhy was reported as saying by the paper. Zyuzin, his wife and children together own 67.42% of shares in Mechel, and Zyuzin's relatives cannot vote on interested-party issues because they are affiliated with the principal shareholder, the expert said.
After the new share issue, Zyuzin's stake would be diluted to 12.8%, the effective stake of his wife and children would be 4.1% and the free float would be 8%. After buying the new shares, Zyuzin's stake would increase to 87.8% and together with his relatives own 91.9%.
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