* Mechel's debt totals $8.6 bln
* Helping Mechel would be "unprofitable" for VEB
* Other bailout plans include RZhD Elga rail sale
(Adds context, background)
By Alessandra Prentice
MOSCOW, July 9 Russian state-owned development
bank Vnesheconombank (VEB) said on Wednesday it would not take
part in a bailout of indebted miner Mechel,
extinguishing hopes for a convertible bond scheme that was seen
as its most likely lifeline.
The loss-making coal to steel group, hit by weak prices for
its products, is in critical need of government support.
With debts of $8.6 billion, Mechel, co-owned by billionaire
Igor Zyuzin, has already gone through several debt
restructurings with creditor banks.
Russia nursed its oligarch-owned conglomerates through the
2008-09 global crisis, avoiding a wave of defaults. 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.
In June Economy Minister Alexei Ulyukayev said the
government was considering implementing a 180-billion rouble
($5.3 billion) scheme that would involve a convertible bond,
which could be purchased by state development bank
Vnesheconombank, or VEB.
However on Wednesday VEB chairman Vladimir Dmitriev ruled
out the bank participating in the bailout or any other plan to
save Mechel, Itar-Tass news agency reported.
"We at the bank have taken the decision not to participate
in the suggested schemes to save Mechel. The suggested schemes
would be loss-making for the bank," Dmitriev was quoted as
Other plans to help the coalminer include providing state
controlled monopoly Russian Railways (RZhD) with the funds to
buy the rail link to Mechel's key Elga project for up to 70
However it is not clear if this or other proposals are still
on the table.
Some banks in the group of creditors, which includes
Sberbank, VTB and Gazprombank, have been
calling for the removal of majority owner Zyuzin, Russian media
reported in June.
The convertible bond scheme would have helped the banks to
reduce bad debt provisions at a time when Russia's economy is
slowing partly due to Western sanctions over Russian action in
($1 = 33.9670 Russian Roubles)
(Reporting by Alessandra Prentice; editing by Timothy Heritage
and Keiron Henderson)