Mechel plans 2014 asset sales to cope with $2 billion debt

Mon Dec 23, 2013 12:26pm EST
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By Polina Devitt and Svetlana Burmistrova

MOSCOW (Reuters) - Loss-making Russian coal miner and steelmaker Mechel (MTL.N: Quote) (MTLR.MM: Quote) plans to raise around $1 billion from the sale of assets in 2014 which would help it to offset $2 billion debt it has to repay next year, the company said on Monday.

Mechel, controlled by billionaire Igor Zyuzin, like other Russian steelmakers invested heavily in expansion before the 2008 financial crisis hit demand, forcing it to borrow to support itself.

Russia's largest lenders, including Sberbank (SBER.MM: Quote) and VTB (VTBR.MM: Quote), have recently agreed to grant covenant holidays for Mechel for the next year. Sberbank has also restructured Mechel's $772 million loan.

The moves allowed the company to report financials for the third and for the second quarter on Monday without the risk of breaching debt covenants.

Its net debt was at $9.4 billion including financial leases as of December 6, of which $2 billion was due to be repaid in 2014, the company's presentation showed. It had $0.4 billion in cash and available credit lines at the same date.

"Next year the group will complete the restructuring of its assets, selling off the remainder of the non-strategic assets, which will bring around $1 billion of cash," chief financial officer (CFO) Stanislav Ploschenko told a conference call.

The cash will be used to reduce the debt, he added. The estimate includes proceeds from a planned sale of a minority stake in its large Elga coal project in Russia.

Mechel has given up on plans to sell a stake in its Mechel Mining and has postponed the buy-back of its own shares it announced in June, Ploschenko added.   Continued...

A general view shows the Mechel company headquarters in Moscow February 25, 2010. Picture taken February 25, 2010. REUTERS/Sergei Karpukhin