The court recovered $244 million from Mechel in Gazprombank’s lawsuit

(New version of the text, added credit line details, quotes, analyst commentary)

MOSCOW, July 17 (Reuters) – The Moscow Arbitration Court has decided to recover approximately $244 million in debt from mining and metals company Mechel in a lawsuit filed by Gazprombank to recover funds from a credit line secured by foreign export agencies, a restructuring over which the company has been negotiating since several years.

In April 2023, Gazprombank filed a lawsuit against Mechel for 11.94 billion rubles in connection with the repayment of a loan under the company’s 2010 agreement with the French BNP Paribas, according to court materials.

On Monday, the court upheld the claim in its entirety, according to the files of the arbitration cases. However, the announced decision states that the recoverable debt included approximately $154.8 million in principal debt and $89.4 million in interest, TASS and Interfax reported from the courtroom.

The debt will be collected from the defendants jointly and severally in rubles at the exchange rate of the Central Bank of the Russian Federation on the date of payment.

A Russian bank, on the basis of a financial participation agreement, provided financing to a French bank so that it could grant a loan to the Chelyabinsk Metallurgical Plant, which is also a defendant. In total, 30 tranches worth $ 182 million were issued from 2010 to 2013, RIA Novosti reported from the court. The borrower was supposed to return the loan to Gazprombank through BNP Paribas between 2013 and 2019, but did not, and Mechel was the borrower’s guarantor.

Principal credit debt is approximately $155 million and total debt exceeds $244 million.

A representative of Gazprombank, quoted by RIA Novosti, referred to one of the anti-sanctions decrees of the President of the Russian Federation, which allowed Russian creditor banks to demand repayment of loan debts directly from the debtor, bypassing a foreign financial agent.

According to the defendants, cited by Interfax, the presidential anti-sanctions order should not apply to this lawsuit because the last payment was made in 2014. In addition, according to them, the warranty period and the statute of limitations have already expired.

“We are waiting for the text of the court order, we will read it,” a representative of Mechel said, without giving details.

Gazprombank’s press service has not yet responded to Reuters’ request.

In the spring of 2020, Mechel agreed to restructure its $5 billion debt to Russian state-owned banks – VTB and Gazprombank – for seven years, with an option to extend to 10 years, in exchange for the sale of its flagship Elga coal project, the funds from which were used to pay off the debt. However, the company still had to agree restructuring with holders of $500 million in loans secured by export agencies.

Mechel, which was traded in New York, admitted in a Form 20-F report that it was past due on loans secured by foreign export agencies (ECAs) in January 2021 and does not have the means to repay if creditors demand prompt repayment. .

The company was negotiating the restructuring of this debt.

In its 2021 financial report, Mechel reported that after restructuring in 2020, it had fulfilled its obligations to Russian banks on schedule, continuing negotiations on the loan portfolio with foreign banks and creditors on the possibility of debt restructuring and expecting to agree on terms in 2022 .

In 2010, the Mechel plant, under the group’s guarantee, obtained a credit line under an agreement with the French BNP Paribas to finance the rolling mill at the plant in Chelyabinsk. BNP Paribas acted as the coordinator and transferred a tranche of EUR 102.8 million, another EUR 89.2 million was allocated by Italian UniCredit, and a tranche of USD 219.4 million was to come from Russian Gazprombank.

Insurance coverage was provided by the Italian SACE agency, the German Euler Hermes and the Chinese Sinosure.

The maturity date for Gazprombank was July 2019, for Western banks – January 2021. The company stopped making payments in 2014, according to its report.

At the end of 2021, the total loan debt was estimated at USD 155 million and EUR 154.7 million (or RUB 24.5 billion at the exchange rate at the time of publication of the report) plus approximately RUB 1 billion in outstanding interest.

By the end of 2021, Mechel’s net debt amounted to 275 billion rubles, total debt on loans and borrowings – 283.5 billion rubles.

The company is able to repay this debt with current operating cash flow, Sinara analysts wrote on Monday, anticipating short-term pressure on Mechel common and preferred stock.

The company’s shares on the Moscow Stock Exchange at 18.33 Moscow time fell by 1.97%. (Anastasia Lyrchikova. Featuring Elena Fabrichnaya and Gleb Stlyarova. Editor Dmitry Antonov)