MOSCOW, October 29. The company “Mechel”, the debt which is about $6.3 billion, does not exclude the possibility of selling the assets, said today the Chairman of the Board and principal owner of “Mechel” Igor Zyuzin in an interview with TV channel “Russia 24”. This is the first interview of the businessman, who previously were not favored by the attention of journalists.
“We do not exclude the possibility of selling the assets, said Zyuzin. – We consider this possibility, but we believe that in this situation, when asset prices are low, you need to look very carefully, what you can do to sell assets or wait, when will move the market for the products or assets”.
“Theoretically we can sell,” Zyuzin said, adding that he is not ready to sell the entire company. “Don’t have. You really expect a different answer?”, said Zyuzin, answering the question about the possible sale of “Mechel”.
OJSC Mechel, founded in 2003, which unites more than 20 industrial enterprises in 11 regions of Russia, and also in Lithuania and Ukraine. Manufacturers of coal, iron ore, steel, rolled products, ferroalloys, heat and electric energy.
Suggestions for Elgg
The main investment project of Mechel is the development of Elga coal Deposit in Yakutia. “In total, the assets in Yakutia cost to our company of $2.7 bn (2008 – approx. ed.),” said Zyuzin, who controls 67,42% of “Mechel”.
Today Mechel is studying several proposals on partnership in the framework of the development of the Elga coal Deposit and the sale of the business, said Zyuzin. “We have a few suggestions about partnership, and about selling the business. We are very carefully studying them,” said the owner of “Mechel”.
Mining at Elga began in 2011. In the same year, Mechel put into operation a railway line with a length of 321 km, spending on the construction of 70 billion rubles. In 2015, the Elgg is planned to produce about 4 million tons of coal.
In September 2013, VEB has approved the allocation of funding for “Mechel” on development of the Elga coal complex in the amount of 2.5 billion dollars. In the same year, WEBB listed the “Mechel” bridge loan in the amount of $150 million for the works. However, further funding of ELGI VEB has stalled because of the uncertainty with the railway line, which connects the coal Deposit with the Baikal-Amur mainline. Now “Mechel” finances the project from its own funds.
According to the company, construction of the first phase of the Elga processing complex is scheduled for completion by August 2017, the capacity will reach 9 million tons of coal per year.
Possible sale of part of assets and negotiations with potential investors on Elgg, related, primarily, with a large debt load of the company, which was formed as a result of active investment activity. “I believe that most of the debts we have built up, not by buying up assets, but at the expense of investment activity,” said Zyuzin.
Among major investment projects of “Mechel” of recent years – the construction of relsobalochnogo mill in Chelyabinsk cost 900 million dollars, the railroad to the Elga (70 billion) and modernization of port Posiet ($200 million). For their projects, “Mechel” has attracted Bank loans.
“The greater debt load of the company is that the company invested heavily in new production, and made several acquisitions, which in conditions of stagnation in the markets began to pay off. Mostly foreign assets, currently are not a priority. We are now focused on Russian industrial enterprises and develop them,” said Zyuzin.
Negotiations with banks
Zyuzin now the company continues negotiations on debt restructuring with creditor banks, and “gradually moving to a compromise of the question”.
Total debt of “Mechel” as of 1 September 2015 was $6.3 billion In total debt structure with 66% state-owned banks (Sberbank, Gazprombank and VTB), 23% for international banks and 4% bonds and 5% for other borrowings.
In August-September 2015 Gazprombank and VTB signed an agreement with the company on the restructuring of the debt. The credit agreements provide for a deferral of the repayment of the principal until April 2017 followed by a monthly repayment until April 2020.
Today Mechel continues to negotiate with Sberbank on restructuring of debt (32,8 billion and $778 million).
“I think that relationship has improved. We work constructively with the banks. Mostly our three state banks – Sberbank, VTB and Gazprombank, as well as a syndicate of foreign banks. We are working with them on months-long negotiations, and gradually moving to a compromise of the matter,” said Zyuzin.
The main owner of “Mechel” does not exclude a threat of bankruptcy. “Threatens,” said Zyuzin, answering the question about the threat of bankruptcy of “Mechel”. “Be afraid of me always, but not much,” added Zyuzin.
At the same time Zyuzin noted that the income of “Mechel” following the results of 2015 will exceed interest payments on debt servicing.
By the end of 2014, Mechel earned $709 million of EBITDA, interest payments amounted to $793 million. “this year the situation will break. We hope and indicators of the 1st half shows that this situation will change,” said Zyuzin today.