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.
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