Russian coal and steel producer Mechel has reached debt restructuring agreements with its major creditors after two years of negotiations on a debt pile it said had threatened the company’s survival.
The mining company controlled by businessman Igor Zyuzin borrowed heavily before Russia’s economic crisis and has struggled to keep up repayments as demand for its products weakened alongside tumbling coal and steel prices.
“We have had difficult negotiations on restructuring Mechel Group’s debt and it would be no exaggeration to say that the company’s survival depended on the result of those talks,” Zyuzin wrote in a letter to shareholders on Thursday.
“I am glad to tell you that we have reached an agreement with our major lenders on restructuring.”
Mechel, which employs more than 60,000 people, said it had agreed conditions for $5.1 million – 80 percent of its total debt – to be paid back to its three major creditors and a banking syndicate of international banks over the next six years.
Money owed to lenders VTB and Gazprombank will be paid in roubles, Mechel said, with repayments beginning in 2017 and 2020 respectively.
But challenges remain. The miner will have to repay Sberbank , Russia’s largest lender and the last creditor to agree to a deal, $551 million by the end of this year.
Shareholders too will be asked to approve the conditions at an extraordinary general meeting on March 4.
“Our company’s financial stability and the increase of its shareholder value are now in your hands. Every shareholder vote is vital,” Zyuzin wrote.
At the end of the third quarter last year, the company’s net debt stood at $6.5 billion.