VTB informs Mechel of need to settle 47 bln rubles in debt ahead of schedule
MOSCOW. Dec 5 (Interfax) - The Russian bank VTB has informed Russian mining and steel company OJSC Mechel of the need to settle 47 billion rubles of debt ahead of schedule, a company representative said during legal hearings on Mechel's debt owed to the bank.
"On November 12, Mechel received notice on the early execution of a requirement relating to 47 billion rubles in overdue [debt]," the Mechel representative said.
Mechel's ordinary shares fell 6.3% on the news and preferred shares were down 3.6% on the Moscow Exchange by 4:24 p.m. Moscow time.
The Mechel representative asked that the process be paused pending a decision concerning the position of the government, which is taking part in the search for a debt restructuring deal.
"Given this circumstance, it needs to be clear that the government agrees with the new claim for 47 billion rubles, since it would fundamentally change the situation, with Mechel and on the market in bank demands of our country," the Mechel representative said.
The representative also said that the restructuring talks could be viewed as negotiations on a legal settlement, which might serve as a basis for postponing the case.
However, the VTB representative said such a settlement was out of the question. "This is the position of my superiors," the VTB representative said.
The court ultimately rejected Mechel's arguments.
VTB filed a lawsuit against Mechel in late September to secure repayment of debt totaling 2.99 billion rubles. In previous statements, VTB representatives said that the sides concluded a credit agreement on December 27, 2010 under which Mechel received 43.8 billion rubles in several tranches. Several supplementary agreements were attached to the agreement later. Mechel kept up with current payment until March 2014, but it made no interest payments in the period from March 21 to September 23. The debt on the interest amounted to 2.8 billion rubles and penalties totaled 104.5 million rubles. The date for repayment of principal has not arrived.
Talks on restructuring Mechel debt have been ongoing since the beginning of the year. VTB, Gazprombank and Sberbank of Russia hold over half of Mechel's debt ($8.65 billion in net debt as of the end of the first half). The creditors have insisted on converting the debt into Mechel shares, an idea that majority owner Igor Zyuzin opposes. VTB and Sberbanks have filed lawsuits against the Mechel to secure repayment of overdue debt on the loans.
