Major Setback For Mechel OAO (ADR) (NYSE:MTL)
Russia’s central bank yesterday mentioned that integrated mining and steel company, Mechel OAO (ADR) (NYSE:MTL)’s bonds have no value as collateral for now. This simply means that debt holders would not be able to use the company’s notes to secure loans. Mechel OAO (NYSE:MTL)’s bonds were zero rated by the regulator that indicates the discount to their market value at 100%.
Mechel OAO (NYSE:MTL) had net debt of $9.55 billion as of June 1. The company which is Russia’s largest coal producer for steel making is holding a round of talks with lenders about covenants and debt restructuring. Amid speculation regarding difficulties with debt talks, share of Mechel OAO plunged over 41% on the Moscow Exchange, to a record low. However the company and Russian banks denied any such difficulties.
The Banks and the Bonds
Herman Gref of OAO Sberbank said during a webcast presentation that Mechel OAO (NYSE:MTL) is going through a normal process with its lenders though the company is passing through an extremely complicated development stage.
VTB Group, having small holding of Mechel OAO (NYSE:MTL)’s bonds, doesn’t seem to have any significant risk while OAO Gazprombank remains out of sight having no Mechel OAO (NYSE:MTL)’s bonds. To mention, the latter is the company’s biggest creditors.
The First Deputy Chairman Ksenia Yudaeva told reporters, “The central bank doesn’t expect “serious problems” with lenders because of the decision. The decision doesn’t automatically remove Mechel from the so-called lombard list of bonds.”
Hits 52-week Low
Amidst the speculations the stock of Mechel OAO (NYSE:MTL) fell 42.5% to hit 52 week low on Wednesday, November 13. However in the late trade the stock bounced back and its Thursday’s closing was at $2.46. Tile Shop Hldgs, Inc. (NASDAQ:TTS) was the other stock to hit 52 week low during yesterday’s trade losing about 40% in its share price following the allegations to have boosted its earnings.