Mechel said it had refinanced $1.6 billion of the $2 billion used to fund the purchase of its Yakutia coal assets in northern Siberia back in 2007.
The $400 million difference was repaid earlier in the year, while the $1.6 billion of refinancing has been set at a London Interbank Offered Rate of 6%, to be paid back to Mechel’s banking syndicate on a monthly basis from this September through to December 2012.
Mechel’s $1.5 billion credit facility for its Oriel Resources acquisition last year also had $1 billion refinanced at a LIBOR rate of 7%.
Monthly payments will start up in July 2010 and go through to December 2012.
Funds from a recent three-year loan from Russia’s major, privately owned Gazprombank were used to pay off $500,000 of the Oriel facility.
The refinancing comes within weeks of Mechel’s announcement that there were substantial doubts about its ability to continue as a going concern.
“Mechel has become the first Russian company which managed to refinance its significant credit facilities with foreign banks by means of long-term instruments and, moreover, it was done on acceptable and favourable terms in the current market environment,” Mechel chief financial officer Stanislav Ploschenko said.
He added the refinancing would make operational activities much easier.
“Moreover, the refinancing structure has been modelled assuming that even if current level pricing for Mechel’s products, that are not the highest ones, remains, the company will face no difficulties to meet its financial obligations.
“I consider this refinancing as an important sign that confirms Russian borrowers’ ability to carry on successful and constructive dialogue with international financial organisations in the current difficult situation.”
Mechel ended 2008 with debt of $5.37 billion and a cash position of $254.84 million, with the global steel slump not helping the situation.
The company has previously failed to comply with certain covenants of major loan agreements with its banks and this had triggered unfavourable repayment conditions.