VTB sues Mechel for $750m over unpaid loan

By bne IntelliNews February 3, 2015

 

Russia's state-controlled VTB Bank has sued Mechel, the troubled mining and metals major and one of Russia's most indebted industrial holdings, for RUB50.2bn ($0.75bn) in the Moscow Arbitrage Court. The shares of Mechel on MICEX dropped by about 10% on the announcement. Previously VTB filed for the bankruptcy of Mechel's Singapore trading company Mechel Carbon.

Another major creditor of Mechel, Russia's largest bank Sberbank, said that the bank still hopes to find a compromise with the company, but will also be forced to turn to the court in the near future.

In December Mechel agreed an alternative plan of debt restructuring with its third main creditor Gazprombank. Mechel owes the bank RUB26.8bn and $1.4bn. The same proposal (reportedly restructuring via bond issue) was submitted to the other two main creditors, the state-controlled banks VTB and Sberbank. VTB confirmed receiving the proposal from Mechel, but said it was premature to call it a breakthrough in the situation with the company. As of the end of Q3, Mechel's net debt amounted to $7.84bn.

According to unconfirmed reports, at the beginning of November, Igor Zyuzin (who holds 67.42% of the shares), was given an ultimatum by the Russian government: either accept converting the debt into shares in favour of the three state-controlled banks, diluting his ownership in Mechel, or have the government withdraw from regulating the situation with its main creditors.

Converting all of Mechel's debt would mean issuing an additional 5.2mn shares, dilluting Zyuzin's stake to 5%, and granting three state banks - GazpromBank, VTB and Sberbank - 40%, 31% and 22% of the voting shares respectively. The free float of the company would drop from 30% to 2%.

Unconfirmed reports said that Zyuzin's direct stake in Mechel had dropped to 51.2%, after offloading an 18% stake owned via a Russian company to his children and his wife. The share divestment could be motivated by personal guarantees given by Zyuzin on loans to Mechel, say legal experts cited by Vedomosti, which could lead to his shares being targeted by court action. According to other experts, reducing the shares in the company he holds directly or indirectly could constitute a breach of loan covenants.  

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss