Russian mining and metals company Mechel has signed a Rb40bn (US$1.28bn) loan agreement with VTB Bank.

The five-year facility will help Russia’s largest producer of coal for steelmakers refinance its current debt. Mechel says Rb25bn of the loan will be used to settle its short-term debt this year, including loans from VTB Bank and Mechel OAO’s ruble bonds.

“VTB Group has been our reliable partner for years,” Mechel’s senior vice-president for finance, Stanislav Ploshchenko says. “This loan deal has reconfirmed our productive co-operation. Securing a new loan from VTB Bank will enable the company to refinance a large share of its loans that are due in 2013, which will significantly improve the group’s debt structure over the next 12 months and give us more flexibility in cash flow management.”

Mechel has been given a 15-month grace period for the loan, and has agreed for repayment to follow in quarterly instalments, with the final repayment being made five years after the agreement is signed.

“Throughout our years of co-operation, Mechel has proved to be a high-quality borrower,” says Yuri Soloviev, first deputy president and chairman of the management board at VTB Bank. “Working with mining and metals companies is one of VTB Group’s strategic priorities. We are ready to provide a stable financial platform for the successful development of our partners’ business.”