OAO Mechel (MTL:US) tumbled to a 12-week low in U.S. trading as the company seeks loan waivers on expectations falling prices have caused it to breach financial covenants.
American depositary receipts (MTL:US) of Moscow-based Mechel, Russia’s largest producer of coal for steelmakers, fell 3 percent to $9.10 in New York, the lowest level since Jan. 6. Trading volumes totaled 7.35 million, or 234 percent of the average three-month trading activity for the shares, according to data compiled by Bloomberg. The ADRs have gained 7.1 percent this quarter.
The Moscow-based company said in a statement today that it is in talks with lenders over waivers and amendments to some of its loans. Declining coal prices mean Mechel (MTLR) will probably breach covenants on credit facilities for 2011, and while the company is confident of a “positive outcome,” no assurance can be given that it will obtain the waivers, according to the statement.
“This news is creating a negative perception of the company,” Oleg Petropavlovskiy, mining and metals analyst at Broker Credit Service in Moscow, said by phone. “While the news stream remains negative, the shares of Mechel will be under pressure.”
Russian prices for coking coal, used by steelmakers, slid to about 5,000 rubles ($170) a metric ton this month from 6,600 rubles a ton in October, according to Morgan Stanley. Coal from Australia, the world’s largest exporter, dropped to about $200 a ton from $270 in the period, the bank said in a report this week.
Mechel has $2.66 billion of debt payments due this year, according to a company presentation given in December.
The ADRs traded at a 3.1 percent premium to the company’s Moscow-traded shares. Mechel (MTLR) fell 6.1 percent to 260.50 rubles, or $8.83 on Russia’s Micex Index, the lowest level since Dec. 29. One New York-listed ADR is equal to one ordinary share traded on the Micex.
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