* Sberbank, VTB, Gazprombank are the main Mechel creditors
* While officials debate, Putin has final decision - source
* Putin keen to avoid large job losses - source
(Adds detail, quotes, context)
By Polina Devitt and Oksana Kobzeva
MOSCOW, July 10 Indebted miner Mechel
may be allowed to declare bankruptcy to sort out its finances, a
Russian minister said, suggesting for the first time that the
company might not be bailed out.
Russia has been nursing its oligarch-owned conglomerates
through a prolonged downturn in the commodities cycle, seeking
to avoid a wave of defaults that would lead to mass job losses
at a time when the economy is at near standstill.
However, Industry Minister Denis Manturov said on Thursday
bankruptcy might help Mechel, a coal-to-steel group with $8.6
billion in debt and which employs 70,000 workers, a day after
state development bank Vnesheconombank (VEB) said it did not
want to take part in any bailout.
While Manturov's comments could signal a change in policy,
the final decision on what to do with Mechel, controlled by
businessman Igor Zyuzin, will most probably rest with Russian
President Vladimir Putin.
"We need to talk about financial recovery either via
bankruptcy law, or by strengthening a managing company, which
should take the risk on itself and the responsibility to take
the company out of crisis," RIA news agency quoted Manturov as
"But the tasks and the commitments are huge and I cannot say
who is willing to take it yet. Therefore, we will continue to
work on it," Manturov added.
He did not give any further details. Mechel declined to
Hit by weak prices for its products, Mechel is in critical
need of financial support. It has already undergone several debt
restructurings with creditor banks, mainly with three state
banks - Sberbank, VTB and Gazprombank.
In 2013, the company earned less than it needed to stump up
in interest payments on its loans.
After months of negotiations, it is clear officials have yet
to reach a consensus on what to do next with a company that
provides employment to thousands in Russia's industrial Urals
regions, its far east and Siberia.
Previously, the government had preferred a bailout because
it was seen as safer for creditors and better able to save jobs.
A source familiar with government discussions on Mechel told
Reuters that Putin would take the final decision.
"There were several orders (to discuss the problem) from
him; now everything will return to him and he will have to make
a decision himself," the source said.
"It's the company's destiny, not Zyuzin's, which is the
president's headache now," the source said, suggesting that the
government would like to avoid a large loss of jobs. "It's
exactly that case when (something) is too big to fail."
The government had been considering implementing a
180-billion roubles ($5.3 billion) scheme in which three banks
would loan this sum to VEB, which would use the cash to buy
convertible bonds from Mechel.
However on Wednesday VEB chairman Vladimir Dmitriev said he
would recommend to the bank's supervisory board, chaired by
Prime Minister Dmitry Medvedev, that it should avoid bailout
schemes as they would be loss-making.
It was not clear whether VEB's board would follow the
advice, nor when they would next meet.
Besides VEB and bankruptcy, another option is for state
banks to seek government guarantees for further restructuring of
Mechel's debts. "If VEB declines (to participate), banks will
push for state guarantees," a banking source told Reuters.
Shares in Mechel were down 13 percent in Moscow on Thursday.
The company's market value has plummeted more than 95 percent
since its peak in 2008, according to Reuters data.
(Reporting by Polina Devitt, Oksana Kobzeva; Writing by Polina
Devitt and Alessandra Prentice; Editing by Elizabeth Piper and