Restructuring under the question: why “Mechel” has not collected a quorum


Voting without a quorum

On Friday, the mountain steel group “Mechel” Igor Zyuzin has held extraordinary meeting of shareholders. The main item on the agenda was approval of the conditions of debt restructuring of the company to major creditors. But the deal has not been approved by the vote of not typed quorum.

“Mechel” — akreditovanniy company among Russian steelmakers. The group’s net debt, as of September 1, 2015 (the last date of disclosure) was $6.3 billion Most of the debt is owed to three Russian banks — Gazprombank ($1.7 billion), Sberbank ($1.3 bn) and VTB ($1.1 billion). Another $1 billion the company owes the syndicate of banks (the rest is public loans). Debt to these creditors (in the amount of — $5.1 billion) and plans to restructure Mechel.

Under the terms of the restructuring plan which the parties agreed in early February, the maturity of the debt transferred from 2016-2017 for the years 2020-2022. The agreement also provides for increased collateral on loans and cross-guarantees. But the last part deals with the banks had to approve the minority shareholders of Mechel simple majority vote, as it falls under the law on related party transactions. This company needed to attract votes 16.3% of the shareholders-minority shareholders.

Mechel did not hear the voice of minority shareholders

The vote on restructuring has not received the quorum because of problems with the ADR holders, explained the General Director of “Mechel” Oleg Korzhov. About 2/3 of the company’s free float accounts for us investors (Depositary receipts of Mechel traded on the stock exchange of new York). According to the chief lawyer of “Mechel” Irina Ipeeva, the main problem arose in connection with the requirement of the Central Bank to provide additional information about the ADR holders — the number and date of registration of the legal entity — holder of the securities. “We were also unable to identify the number of final beneficiaries of ADR due to the complex and multi-layered ownership structure of the receipts. Part of the securities owned by the funds in other funds that in turn represent the interests of third. Some chains reach ten depositories, which complicates the communication with the shareholders,” she says.

The Central Bank modified the instructions on the list information that should be included in the list of Depositary receipt holders on 15 June 2015, said the partner of the legal company “Aleksey Gurov and partners” Daria Gurova. According to her, for a foreign company, the holder of the securities now need the number from a trade or other register, if available. “If the information about this room for some reason not in registry, the company-shareholder actually can’t vote,” said Gurov. American company to vote their shares must now provide data that they are in conventional business practice is not used and therefore often do not know the registration number, registration date and other things, adds the representative of “Mechel”, earlier these requirements was not.

From the Russian minority (one-third of all minority shareholders), 85% voted in favour of restructuring.

“We expected this outcome, we just physically ran out of time. Thus, we have not fulfilled one of the conditions of the restructuring agreement. Now going with the banks to agree on a new course of action. I am confident that we will finish this issue,” said Korzhov. In his opinion, the extraordinary shareholders ‘ meeting of “Mechel” may take place in may.

Second chance

While none of the banks-creditors of “Mechel” declared about the termination of the agreements on restructuring. “We closely cooperate with “a Mechel” in the framework of signed agreements on debt restructuring of the company. Work is continuing on the final fulfillment of all the conditions of restructuring”, — said the representative of VTB. In the savings Bank while studying the situation, some not, said a source in the Bank (officially the representative of the Bank does not comment on the outcome of the meeting of shareholders of “Mechel”). The representative of Gazprombank has not responded to the request .

Under the terms of the restructuring “Mechel” to the end of the first quarter should list the savings Bank tranche of $551 million of this amount it plans to raise through the sale of shares (50%) in the company “Elga coal” owning the Elga field and railway, said a source close to “Mechel”. Korzhov at the meeting confirmed that such negotiations with the Bank are conducted, but details not revealed.

The fact that the company has not complied with the terms of the restructuring, additional collateral and the surety, does not mean that the agreement with creditors is no longer in effect, considers analyst IK “Aton” Andrey Lobazov: “Mechel” have another chance to perform this part of the transaction at such second meeting of shareholders in may. The minority shareholders support the restructuring, said one of the owners of ADR Mikhail Karev (its share does not reveal), which today failed to vote on the deal due to the fact that not had time to obtain instructions from the Depositary. “To a Mechel” it is necessary to give the green light, otherwise there will be a question on bankruptcy of the company, and it is not interesting, said the shareholder.

After the announcement about the absence of a quorum of the shares of “Mechel” on the Moscow stock exchange fell by 17%, but then retraced. Following the results of day decrease in quotations was 8%, a market capitalization of 26.6 billion rubles.