Russias Biggest Bank Threatens Mechel With Bankruptcy

Igor Zyuzin, the former Russian billionaire owner behind steelmaker Mechel, has watched his shareholder wealth drop by over 97% in the last five years. Now Sberbank threatens to shut part of the company down if it doesn’t pay its debts by the end of the first quarter 2016. (Photo by Andrey Rudakov/Bloomberg)

Russia’s biggest corporate lender is giving a once mighty steel giant an ultimatum: put up or we are shutting you up.

Sberbank said recently that it will begin bankruptcy proceedings for Mechel early next year if an agreement on restructuring the company is not reached, bank CEO Herman Gref told the Russia 24 news network on Dec. 25.

Gref is one of Russia’s most respected businessmen. He said both Sberbank and Gazprombank, a division of the state controlled Gazprom, has set a clear number of conditions for restructuring Mechel’s roughly $4 billion debt. If all of them are not met, then Sberbank will force the company into bankruptcy.

Mechel owes Sberbank $1.27 billion; Gazprombank $1.8 billion and VTB Bank $1.1 billion.

The conditions of the deal have not been made public. But Sberbank is demanding initial payment of 31.5 billion rubles ($450 million) and 3.3 billion rubles ($47 million) in fines and penalties. The loan for the remaining balance would be stretched out until 2020 at Sberbank at least.

Mechel became a penny stock in August and is now trading at just $0.84. In 2008, it reached a historic peak of $57.62 per share.

Mechel’s billionaire shareholder, Igor Zyuzin, has other assets he can sell if he wants to keep the steel company alive. He owns a stake in a coal mine he can dump to Gazprombank, the majority owner of the mine, Vedomosti business daily reported.

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