Mechel OAO is studying a new plan to liquidate debt

Mechel of Russia is in discussions with the government and local banks on a new plan that should help the company reduce its debt by approximately US $ 9 billion. It is believed that the proposal could include a merger of some of Mechel's assets with metallurgical plants and mines owned by steelmaker Evraz Plc and Vnesheconombank.
The proposed plan has not yet found support from the government. While Evraz is featured in the proposal, the company does not participate in discussions.

Mechel, which employs about 70 thousand people, is one of the largest debtors among the mining companies in Russia. Like its foreign counterparts, the Russian company faced a drop in coking coal prices as demand for raw materials from steel producers weakened due to economic slowdown.

Mechel has already held talks with the board of Vnesheconombank, known as VEB, and creditors of Gazprombank OJSC, Sberbank of Russia OJSC and VTB Bank about plans for 35 billion rubles. credit and subsequent sale of bonds to VEB in the amount of 180 billion rubles, convertible by Mechel. A final proposal has also been put forward to create a new company that will lend Mechel's assets, with the exception of its Elginsky coal deposit and international units, some of the assets of Evraz and Amurmetal of the VEB metallurgical plant. The offer is an alternative to the possible sale of convertible bonds.

The plan provides for the support of the group by Russian and foreign investors, who will receive 50 percent of the shares in the new company. As a result, Mechel may receive 20 percent of the shares and $ 7.5 billion in cash to pay off the debt. Evraz, which had $ 6.5 billion in debt at the end of 2013, could raise $ 2.5 billion in this operation.