In accordance with this agreement, Mechel has sold its 51% of the shares of Elgaugol, Elga-Doroga and Mechel Trans Vostok to A-Property. The consideration amounted to 89 billion rubles, including the control premium. The buyer also fully settled Mechel’s liabilities to the state development corporation VEB.RF, totaling $107 million.
At the same time, Mechel signed debt restructuring agreements with Gazprombank and VTB Bank, with proceeds from the sale of the 51% share in Elga Coal Complex used to repay the debt to the 2 banks in proportion to their share in Mechel’s debt leverage. As such, 57.4% of the transaction amount will be used for early debt repayment to VTB Bank and 42.6% for repayment to Gazprombank. As a result of this and the waiver of the option to buy Gazprombank’s 49% share in Elga, the company’s overall debt leverage will go down by approximately 145 billion rubles.
The loans’ debt maturity is extended by seven years to March 2027 with the option of an additional 3-year extension. Other essential terms, including interest rates and loan collateral, remain unchanged. The overall restructured debt to Gazprombank and VTB Bank will total 237 billion rubles after Mechel repay part of its debt with proceeds received from selling Elga.
“With the current economic situation and our debt leverage in mind, we made a difficult but well-considered and informed decision to sell Elga Coal Complex. The funds we receive with this deal will be used to repay part of our loan obligations to VTB Bank and Gazprombank. Reduced debt leverage will help us implement our investment program aimed at increasing coal mining and processing at our Kuzbass and Yakutia facilities, as well as increasing output of high-margin products in our steel division. This will enable us to retain financial and social stability in Mechel’s operations and ensure the company’s further development,” Mechel’s CEO Oleg Korzhov noted.
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