UPDATE 1-Mechel placement marred by mkt turmoil

Fri May 7, 2010 11:06am EDT

Related Topics

* Sells 30.50 mln preferred ADS at $7.50 each

* Original guidance was $10.50-$13.50

* Placement postponed a day, size cut

(Adds details of placement, background)

MOSCOW, May 7 (Reuters) - Coking coal and steel producer Mechel (MTL.N) raised only $229 million in a delayed share placement, less than half as much as hoped, becoming the latest Russian firm to have its issuance marred by market turmoil.

The Justice family shareholders sold 15.25 million preferred shares -- 39 percent less than originally planned -- in the placement on Friday, which had been postponed by a day following the steep plunge on U.S. bousrses on Thursday when a suspected trading glitch and fears of a new credit crunch in Europe threw markets into disarray. [ID:nN06252763].

The sale was for 30.50 million preferred American Depository Shares (ADS) and was priced at $7.50 per preferred ADS, the company said. That is well below the initial price range of $10.50 to $13.80. [ID:nLDE63Q049]

"Nervous investors started to cancel their orders and they (Mechel) had to react," a fund manager told Reuters. "They reduced the size of the placement."

That makes Mechel the latest Russian company to have its issuance plans hit by global market jitters and rising investor risk aversion.

Last week, fertiliser producer Uralcehm postponed a planned IPO [ID:nLDE63T0GB], while real estate firm LSR Group (LSRG.MM) priced a secondary placement at the bottom of an already lowered price range [ID:nLDE63T028].

At the initial size and price guidance, Mechel's placement had been expected to raise $524 million to $689 million for the Justice family shareholders.

Mechel acquired West Virginia, U.S.-based Bluestone Coal from the Justice family last April for $436 million and 83.3 million preferred shares. [ID:nLM122811] The Justice family cannot sell the shares until they are listed on a stock exchange.

Morgan Stanley and Renaissance Securities acted as joint bookrunners for the sale.

Mechel's ordinary shares were down 2.95 percent by 1421 GMT in New York after losing 8 percent on Thursday. (Reporting by Dmitry Sergeyev and Toni Vorobyova; editing by Karen Foster)

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