OAO Mechel (MTL:US) will complete its restructuring within the next 12 months and plans to prioritize price over timing when it comes to selling assets, said Chief Financial Officer Stanislav Ploschenko.
“We are in active talks,” Ploschenko said in an e-mailed response to questions yesterday relayed by Mechel (MTLR)’s press service. “The main goal is to sell assets efficiently, we are not setting any strict deadline.”
Mechel, Russia’s largest producer of steelmaking coal, surged to a one-month high in New York yesterday after saying it got extra time to make repayments on a $1 billion loan by signing a restructuring deal with banks. The stock’s 100-day volatility slid to a seven-month low. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian stocks in the U.S. rose for a second day, while futures on Moscow’s dollar-denominated RTS Index added 0.6 percent to 147,650 in New York.
Moscow-based Mechel, which owed $8.8 billion at the end of the first half, is the most indebted Russian mining company after aluminum producer United Co. Rusal. Mechel, controlled by billionaire Igor Zyuzin, has been challenged by falling commodity prices and the slowdown in China, where growth decelerated for a seventh quarter in the three months to Sept. 30. It also bought assets in the U.S., including Bluestone Coal Corp. in May 2009.
“The company is working with the banks non stop to refinance” more debt, Ploschenko said. Mechel is aiming “to lower our short-term debt, improve the structure of our credit portfolio and help boost Mechel’s financial results,” he said.
The board of Mechel, the biggest decliner on the Russia-US gauge over the past year, recommended selling a stake in OAO Mechel-Mining and other assets, the company said on Sept. 25.
Yesterday’s rally in Mechel’s American depositary receipts sent the stock’s enterprise value, or the sum of its equity and net debt, to 7.4 times estimated earnings before interest, taxes, depreciation and amortization, the most expensive level versus the MSCI Emerging Markets Materials Index since Oct. 25, according to data compiled by Bloomberg. The discount fell to 10 percent, from 15 percent on Oct. 8.
Mechel’s debt may rise (MTL:US) by about $200 million when the company consolidates a portion of assets from Estar Group, Ploschenko said on Oct. 2.
Mechel’s ratio of net debt to earnings before interest, tax, depreciation and amortization was 4.85, making it the second-most indebted (MTL:US) company in Russia’s metals and mining industry after Rusal, data compiled by Bloomberg show. Mechel reported a $823 million loss for the second quarter because of falling coal prices.
“The restructuring deal is a good, promising sign,” Andrey Tretelnikov, an analyst at Rye, MAN & Gor, said by phone from Moscow yesterday. “It’s going to be really hard for them to negotiate good prices because of the overall global market conditions.”
ADRs of Mechel gained 3.6 percent to $6.36 yesterday, the highest level since Nov. 7. The stock rose 0.2 percent to 194.10 rubles in Moscow today. The Micex Index (INDEXCF) climbed 0.6 percent to 1,443.91 by 10:17 a.m.
“We expect the stock will trade at these levels in the foreseeable future,” Valentina Bogomolova, an analyst at UralSib Capital who has a hold rating on the shares, said by phone from Moscow yesterday.
Mechel engaged Rothschild, OAO VTB and Morgan Stanley to find a buyer for a stake of as much as 25 percent in its mining unit, people who asked not to be identified as the information is private, said on Oct. 30. Mechel-Mining, which shelved an initial public offering in September 2011, citing unfavorable market conditions, may be valued at $7.8 billion, according to Deutsche Bank AG.
The Bloomberg Russia-US Equity Index of Russian companies traded in the U.S. climbed 1.1 percent to 94.57 yesterday. The Market Vectors Russia ETF (RSX:US), the largest dedicated Russian exchange-traded fund, rose 1.6 percent to $28.38, the highest level since Nov. 6. The RTS Volatility Index, which measures expected swings in futures, slid 2.6 percent to 21.37 points.
OAO GMK Norilsk Nickel (NILSY:US), the world’s largest producer of the metal, was the biggest gainer on the Russia-US gauge yesterday, jumping 6.1 percent to $17.18, the highest level since May 3. Trading volume was five times the average daily volume for the past three months, data compiled by Bloomberg shows. Shares advanced 2.1 percent in Moscow to 5,295 rubles, today. One ADR represents a tenth of a Moscow share.
Oil slumped for a second day yesterday after a government report showed that U.S. gasoline inventories gained the most in 11 years as demand weakened. Crude oil for January delivery decreased 0.7 percent to $87.88 a barrel on the New York Mercantile Exchange, while Brent oil for January settlement on the London-based ICE Futures Europe exchange fell 0.9 percent to $108.81 a barrel. Urals crude, Russia’s chief export oil blend, declined 0.9 percent to $107.19 yesterday, falling for a third consecutive day.
The S&P GSCI Index of 24 commodities slipped 0.3 percent to 643.26 yesterday.
Futures expiring in December on the ruble showed the currency steady at 30.839 per dollar after the ruble was little changed at 30.8066 per dollar yesterday.
United Co. Rusal (486), the world’s largest aluminum producer, rose 2.3 percent to HK$4.85 in Hong Kong trading as of 11:50 a.m. local time. The MSCI Asia Pacific Index gained 0.2 percent.
-- With assistance from Moming Zhou and Mark Shenk in New York, Yulia Fedorinova and Ksenia Galouchko in Moscow. Editors: Marie- France Han, Tal Barak Harif
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