Opportunity Knocks as Mechel OAO NYSE:MTL Restructures Debt

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Mechel OAO NYSE:MTL, the Russian Federation based holding company that operates internationally in the mining and steel industry has signed a debt restructuring deal with Sberbank, giving an immediate boost to its ADR’s.

Mining, Steel, and Power

Formed in 2003 and previously called Mechel Steel Group OAO, the company operates mainly in the Mining, Steel, and Power sectors. The company’s mining division produces and distributes steam coal and metallurgical coal, iron ore, coke, and limestone, together with several chemical products that include naphthalene and coal tar. For steel, the company focuses on the production and sale of semi-finished steel products while the company’s power division focuses on generating, distributing, and selling electricity and other energy products produced from steam coal.

Mechel OAO NYSE:MTL Restructuring Agreement

At the beginning of the week, Mechel OAO (NYSE: MTL) signed an agreement with Russia’s Sberbank on the restructuring of its two obligations, one of 30 billion rubles and one of $427 million.

The holding company’s subsidiaries Bratsk Ferroalloys Plant OOO, Chelyabinsk Metallurgical Plant PAO, Izhstal OAO, Korshunov Mining Plant OAO, Mechel Trading AG, Southern Kuzbass Coal Company PAO, and Yakutugol Holding Company OAO all reached an agreement with the bank on the restructuring of their obligations totaling close to 13 billion rubles and 427 million US dollars. There was also a separate deal for 17 billion rubles related to the debt of Chelyabinsk Metallurgical Plant PAO that should be signed as soon as the court approves an agreement made prior to the new deal.

The agreements give the company a grace period to April 2017 with loan maturity of April 2020, paid through monthly installments. The overall agreement also secured the postponement of close to 40 percent of its interest payments. The grace period of the main debt could also be extended to January 2020 with an extension of the loan maturity to April 2022, subject to VTB Bank agreeing to similar conditions and subject to other conditions being met this year. To finalize the restructuring of the debt, the company is obliged to repay a portion of its debt to both Sberbank and Sberbank Leasing, in the amount of 2.8 billion rubles.

Uptick in ADRs

Mechel OAO NYSE:MTL, which saw its rating upgraded to “hold” by the Deutsche Bank analysts at the end of March, has been showing a positive trend for several quarters now. Since September last year, the stock has gone up by 1.47 percent, and is still climbing. However, it is still underperforming the S&P500 by 5.11 percent.

News of the restructuring was immediately reflected in Monday’s trading as the company’s ADR’s inched higher. The issue rose by $0.08 or 3.86 percent, reaching $2.15 per share with close to 50,000 exchanged during trading. The company has market capitalization of just under $431 million with a 52 week low of $1.23 and high of $2.96. The company is currently trading with a 50-day moving average of $1.87, while its 200 day moving average price is $1.75.

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