MOSCOW May 30 The Russian state could help
loss-making coalminer Mechel slash its over $8 billion in debt
by providing monopoly Russian Railways (RZhD) with the funds to
buy the rail link to the miner's key Elga project, Industry
Minister Denis Manturov said.
In March, Russian media reported that Mechel and
state-owned RZhD were discussing the sale of the 321-km line for
up to 70 billion roubles ($2 billion), cash sorely needed by the
company, which has $2.7 billion in loans due next year.
State banks have already helped refinance or restructure the
company's debts of $8.6 billion and the industry minister's
comments show the government is focused on preventing the
employer of more than 80,000 people from going bust.
"Together with the Finance Ministry and other ministries,
we're trying to resolve Mechel's problem in every possible way,"
Manturov told reporters in Moscow on Friday.
"The only option is to provide RZhD with a capital increase
for the purchase of the railroad ... If the debt falls to at
least $6 billion, (Mechel's) prospects improve," he said,
confirming that Mechel's co-owner Igor Zyuzin had turned to the
government for help.
Russia nursed its oligarch-owned conglomerates through the
2008-09 global crisis, avoiding a wave of defaults, in contrast
to its financial collapse a decade earlier. Mechel piled on more
debt to pay for acquisitions, only to be hit by an industry
slump that left it with a devalued asset portfolio.
It posted a record loss of almost $3 billion last year and
earlier in May a Russian newspaper reported creditors were
questioning the future of the company.
Mechel also needs funds to continue development of Elga in
remote Yakutia which has one of the world's biggest coking coal
The firm has invested over $2 billion in the project so far,
the majority of which went towards the construction of the
railway, which a RZhD spokesman said on Friday the monopoly was
prepared to take off Mechel's hands if the state provides the
However a participant in a government meeting on Mechel's
finances told Reuters that while this option had been discussed,
it had not been approved as it would place too high a strain on
"There's no money in the budget," the source, close to RZhD,
said on Friday.
(Reporting by Olesya Astakhova; Additional reporting by Gleb
Stolyarov and Andrey Kuzmin; Writing by Alessandra Prentice;
editing by Stephen Addison)