JSC “Chelyabinsk metallurgical plant” (Mechel group)
Debt restructuring of “Mechel”, which allowed the company to avoid bankruptcy, was made after the Kremlin’s intervention, fearing massive layoffs at the company and the deteriorating financial condition of Gazprombank, reported Reuters citing sources familiar with the matter 13.
The Kremlin, as told to sources, feared that if Mechel bankrupt, it will lead to layoffs among the 66 thousand workers, many of whom live in depressed regions.
Two sources in banking sector told Reuters that the country’s leadership is also required to restructure debts of “Mechel” for fear of the damage that the bankruptcy of the company will cause Gazprombank, one of the largest creditors of “Mechel”. Debt “Mechel” before Gazprombank, according to calculations by Reuters, was equal to 20% of the working capital of the Bank.
“In this situation was a lot of politics,” — said the first Deputy Chairman of Sberbank Maxim Poletayev. According to him, “no one wanted to save [Igor] Zyuzin [the main owner of “Mechel” – RBC], but we had to do everything possible to avoid social instability. Sberbank is also the largest creditor of “Mechel”.
The organization restructuring deals were involved the head of “Rosneft” Igor Sechin, told Reuters one of the sources. Sechin told the news Agency that did not want to reveal what he says with Russian President Vladimir Putin, but admitted that he was aware of the problems of “Mechel”. “I’m not happy. I believed, and believe, that “Mechel” has earned the support eventually received,” — said the head of “Rosneft”.
The source that reported the involvement of Sechin in the rescue of “Mechel”, and another interviewee said that on behalf Zyuzin lobbyists rescue company was also made by the former head of Russian Railways Vladimir Yakunin and President of RSPP Alexander Shokhin.
Zyuzin refused to answer questions from Reuters. Yakunin told Reuters that “the government” raised the issue of “Mechel” after a meeting with the Industrialists.
The representative of “Mechel” denied that the company relied on the direct intervention of the Kremlin. He said that its creditors were guided solely by business interests that the company helped the fall of the ruble, reduced the size of its debt in dollars.
Reuters in one of the creditor banks said the claims were withdrawn in September last year, paving the way to a deal on debt restructuring. The agreement with creditors was approved by the shareholders of “Mechel” on may 30.
Press Secretary of the President of Russia Dmitry Peskov told the news Agency that the country’s leadership did not give any instructions for the salvation of “Mechel”. “The Kremlin is not discussed and is not consistent”, — he said.
Gazprombank did not respond to requests by Reuters. The representative of VTB, which is also the largest creditor of “Mechel”, said the Bank’s decision to restructure its debt, was dictated by business interests, and called rumors of political interference in the deal “complete nonsense”. The head of VTB Andrey Kostin told Reuters that the decision “Mechel” was accepted by the creditors, the government wanted the agreement was reached because “it is important for a social problem”.
How to save “Mechel”
Reuters also draws attention to the fact that Gazprombank is the third largest Bank assets in the country – had close ties with Putin’s inner circle. Sergei Ivanov, the son of the head of the presidential administration, to the beginning of this year has served on the Board of a financial institution. And the main shareholder of the Bank is Gazfond, which is headed by Yury Shamalov, the elder brother of Kirill Shamalov, who owns a large stake in SIBUR. Reuters calls Kirill Shamalov son-in-law of Putin.
Mechel is one of Russia’s largest mining and metallurgical companies. The largest creditors — Gazprombank ($1.7 billion), Sberbank ($1.3 billion) and VTB ($1.1 billion). By the end of 2013, the debt of “Mechel” reached 12.4 EBITDA and the company appealed to the banks to grant Covenant holidays, but Sberbank and VTB have refused. By the summer of 2014, the government and the presidential administration developed the plan of financial assistance to “Mechel”, which consisted of a refinancing by VEB and the redemption of the railway line Ulak — Elga. However, the VEB, which itself was in a difficult financial position, has convinced officials that to help the administration can not.
In August 2014 Sberbank, VTB and Gazprombank suggested Zyuzin to convert $3 billion debt into 75% of shares of “Mechel”. Zyuzin put forward a counter offer to buy the entire company for $500 million. Negotiations have stalled, and Sberbank, VTB went to court.
Gazprombank has decided not to bankrupt “Mechel”. Forbes reported that the Chairman of the Board Andrei Akimov called Prime Minister Dmitry Medvedev said that he supports Zyuzin in refusing to convert debt into shares, while VTB and Sberbank pursue strange interests, which can lead to the collapse of the company.
A plan of debt restructuring “Mechel” was agreed by the banks in early February 2016. It provides for the postponement of the payment of debts, 2016-2017 for the years 2020-2022 and the increase in collateral on loans and cross-guarantees.