20 Sep 2010 15:25

CORRECTED: Mechel to pledge 20% of flagship steel mill for $417 mln loans

(Headline, text adjusted)

MOSCOW. Sept 20 (Interfax) - Mechel will pledge 20% of the shares in its flagship Chelyabinsk Metallurgical Plant (CMP) as security for $471.2 million in loans to finance a universal rolling mill installation project.

The company said in materials that its shareholders voted to pledge the 20% at an EGM on September 15.

It said in a press release later on Monday that the new $471.2 million Senior Term Loan facility, entirely fronted by BNP Paribas S.A., consists of three tranches underwritten by BNP Paribas S.A., GPB (OJSC) and UniCredit Corporate Banking S.p.A. GPB (OJSC)'s tranche is $219.4 million, BNP Paribas S.A.'s tranche is EUR102.8 million, UniCredit Corporate Banking S.p.A.'s tranche is EUR89.2 million. The disbursement period under all three tranches is 30 months starting from the date of signing of the credit facility agreement. The repayment will be done by equal semi-annual installments starting at the end of the disbursement period spreading over 6 years for the first tranche and 7.5 years for the second and the third tranches. The credit facility benefits from insurance coverage of the Italian, German and Chinese export credit agencies - respectively Sace, Euler Hermes and Sinosure.

The purpose of the facility is to finance payments under two contracts: the equipment and technology supply contract signed with Danieli & C. Officine Meccaniche S.p.A. and the general construction contract with MinMetals Engineering Co., Ltd.

"Only a week after the successful refinancing of the 2 million dollars of foreign debt we signed another landmark loan agreement, which secures financing for our biggest investment project in the steel division, ensuring its timely execution. This agreement is unique not only in its long tenor but also in the number and quality of its participants representing both foreign and Russian banks as well as 3 national export credit agencies. This marks the level of confidence in our Group and the investment projects we are carrying out. The universal rolling mill is a strategic project for our Group and for the infrastructure development in Russia. When it is installed it will primarily manufacture high quality railroad rails up to 100 meters in length using state-of-the-art rolling technology. This product along with high quality structural shapes will dramatically improve the efficiency at CMP and of the entire steel division of our Group," the press release quoted Stanislav Ploshchenko, Mechel's Chief Financial Officer, as saying.

Mechel has consolidated controlling stakes in coal, steel and iron ore companies and a number of ports. General Director Igor Zyuzin is Mechel's chief beneficiary. The ADR free float is around 30%.