Russian mining and metals company Mechel has signed agreements to refinance its short-term credit facilities totalling US$2.6bn. The amount was raised to purchase assets in Yakutia and Oriel Resources.

As a result of negotiations with the banking syndicates that provided Mechel with credit facilities for the acquisition of the Yakutugol Holding Company and Elgaugol in October 2007 and Oriel Resources in April 2008, the loan agreements for the refinancing of these facilities by means of long-term instruments have been signed.

The sum refinanced under the credit facility for the acquisition of coal assets in Yakutia amounted to US$1.6bn at Libor +6% (the total facility amount being US$2bn). The maturity period provides for monthly equal instalments, from September 2009 to December 2012. The remainder of the credit facility of US$400mn has already been repaid with the company’s own funds, as per the agreed schedule.

The credit facility for the US$1.5bn acquisition of Oriel Resources has been refinanced in the amount of US$1bn at Libor +7%. The maturity period provides for monthly equal instalments, from July 2010 to December 2012. The remainder of the credit facility of US$500mn was repaid from funds raised from the Gazprombank three-year loan, according to the agreement which was signed by the company in February 2009.

Mechel CFO Stanislav Ploschenko comments: “Mechel has become the first Russian company to refinance its significant credit facilities with foreign banks by means of long-term instruments and, moreover, it was done so on acceptable and favourable terms in the current market environment.

“Financial covenants were also adapted to the company’s current situation. I would like to emphasise that as a result of these credits, refinancing the short-term debt of the company of US$2.6bn will again be reclassified as long-term debt in corporate financial reporting, making performance of financial and operational activities much easier.

“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.”