Mechel creditors might provide 215 bln rubles for bailout - paper
MOSCOW. June 17 (Interfax) - State banks that hold two thirds of Mechel's debt have worked out a new plan to support the Russian steel and coal company at the request of President Vladimir Putin, national daily Kommersant reported on Tuesday, citing sources.
Gazprombank , Sberbank and VTB might allocate another 215 billion rubles for Mechel , which had a net debt of $8.3 billion as of mid-May, the paper said.
The plan calls for providing Mechel with a bridge loan of 35 billion rubles (approximately in June) and another 180 billion rubles that would be used to buy new shares or convertible bonds issued by the company. It should pay down most of the debt.
The chances of the plan being implemented are "very high," Kommersant reported sources close to the creditors as saying.
An option is also being considered where money would be lent to state lender Vnesheconombank (VEB), which would get the securities. In the case of a new share issue, VEB could become the owner of almost 85% of Mechel stock, but analysts believe a bond issue is more likely.
The funds would be provided by Mechel's biggest creditors: Gazprombank, VTB and Sberbank, to which the company owes respectively $2.3 billion, $1.8 billion and $1.3 billion. The money could be provided through VEB, which would buy the stocks or bonds. This option is preferable for the state banks, as it would allow them to reduce risks, the paper said.
The involvement of VEB would also free the banks of the need to take on some issues concerning the management of the company in the event of a share issue.
"Mechel is overloaded with debt and the only means of recovery is to replace part of the debt with equity, but this option is not very interesting for the banks since such investment will not generate a return for a long time. In this situation, an economic agent in the form of VEB is the preferable option for development. VEB is a development bank that does not pursue profit and should prevent the bankruptcy of such a large company, avoiding growth of unemployment," the paper reported one source close to Mechel creditors as saying.
But VEB, which is already lending Mechel $2.5 billion for the development of the huge Elga coal field, is wary of the idea, the paper reported another source as saying. Mechel and the banks declined to comment.
Putin instructed the government to work out options to financially assist Mechel in March, the paper reported its sources as saying. The order was addressed to First Deputy Prime Minister Igor Shuvalov.
The possibility of Russian Railways (RZD) buying the railway from Elga to the Baikal-Amur Mainline (BAM) from Mechel for 50 billion-70 billion rubles was discussed at a meeting that Shuvalov held in late March. But RZD does not have the available cash and the government did not find the funds to finance this idea.
At a meeting with Kremlin aide Andrei Belousov on May 30, Mechel's problems were laid at the feet of the banks, which along with relevant government agencies were supposed to submit their proposals to Shuvalov by June 11. Shuvalov's office confirmed that proposals were received, but did not comment on their substance.
Kommersant's sources said the plan will be discussed this week, but it is still unclear at what level - in the Kremlin administration or the government.
