* Mechel's debt totals $8.6 bln, needs restructuring
* Options are participation of VEB or converting debt to
* VEB bank opposed to helping miner
* Bankruptcy possible if no agreement reached - Kremlin aide
(Adds reaction from VEB, Severstal comments)
By Darya Korsunskaya and Andrey Kuzmin
MOSCOW, July 30 The head of Russia's state
development bank has ruled out taking part in a rescue of ailing
miner Mechel, possibly making a rival
government-promoted debt-for-equity deal involving creditors a
more likely option to save the company.
Russia has been looking into ways to help Mechel, a
coal-to-steel group with $8.6 billion in debt and 70,000
workers, for several months and has proposed two schemes, both
involving a change in ownership.
The first option would involve the participation of
development bank Vnesheconombank (VEB), though it has already
recommended avoiding further restructuring schemes.
The head of VEB stuck to his guns on Wednesday, saying any
involvement in saving Mechel, controlled by businessman Igor
Zyuzin, was not in the bank's best interests. "The scheme
involving VEB's participation is loss-making for us - we cannot
participate in this," Chairman Vladimir Dmitriev told
The government's other proposal is to convert part of
Mechel's $8.6 billion debt into shares, with the involvement of
the main creditor banks.
The final decision on which course to follow lies with
Mechel's owners and its creditor banks - mainly Sberbank
, VTB and Gazprombank - President
Vladimir Putin's top economic aide said on Wednesday, warning of
the risks if a consensus isn't reached.
"Bankruptcy will happen if they do not reach an agreement,"
aide Andrei Belousov told journalists. "If they manage to reach
an agreement, all these options in one form or another involve
at least a temporary change of ownership," he said, promising a
decision within days.
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, a stagnating economy and recent Western-imposed
sanctions, including against the Russian banking sector, mean
state finances are tight.
Earlier in July, a Russian minister suggested for the first
time that Mechel, which has already undergone several debt
restructurings, could be allowed to go bust.
While officials disagree on who should help Mechel,
Severstal, Russia's second-biggest steel producer,
said it would consider buying some of Mechel's assets if they
were put up for sale after a bail-out.
"It's obvious that Mechel can't survive without
restructuring," Alexey Mordashov, Severstal's controlling
shareholder, told reporters when asked whether the company would
consider buying a stake in Mechel.
"Mechel's assets probably have some value, which is
significantly lower than its current debt," Mordashov said. "If
the final owner of Mechel is determined (and they) decide to
sell them, we certainly will look at the proposal."
Severstal recently agreed to sell two U.S. steel plants for
$2.3 billion, of which it plans to dole out $1 billion in a
(Writing by Polina Devitt and Alessandra Prentice; Editing by
Elizabeth Piper and David Holmes)