MOSCOW, Nov 25 (Reuters) - The MICEX metals and mining index led Russian shares higher on Monday amid speculation a meeting between Prime Minister Dmitry Medvedev and Rusal, Mechel and Evraz could help the heavily indebted companies.
At 1303 GMT, the rouble-denominated MICEX was up 0.4 percent to 1,511 points. The dollar-denominated RTS index gained 0.1 percent to 1,446 points. MICEX metals and mining index outperformed, rising 1.2 percent
Medvedev is due to meet the steel and mining companies to discuss their debt and ways to boost industrial growth, the newspaper Vedomosti reported on Monday. The Economy Ministry confirmed a meeting on the metals and mining industry would take place on Monday but did not say which companies would attend.
Metals industry sources said Rusal, Mechel and Evraz were invited and that their debt would be the main topic of discussion. The government’s spokeswoman declined to comment.
Analysts said signs of government support for the metals industry would help the stocks. The Russian economy is growing at its slowest pace in four years, with industrial output expected to barely expand this year.
Depositary receipts in Rusal rose 7.7 percent in Moscow trade. Mechel fell as much as 19 percent in early trading, then recovered to trade down 2.2 percent.
“If the companies are provided with subsidies or any other help, that would change the whole picture,” said Andrey Yarnyh, a salesman at UBS in Moscow. “But the capitalisation of Mechel has declined so significantly that its weight in portfolios of investment funds is insignificant”.
Mechel has fallen 68 percent so far this year, hit by lackluster coal prices in Asia and Europe and debt woes. The company said on Monday it had reached agreements with creditors on covenant holidays for a $1 billion syndicated loan as part of continuing debt-restructuring negotiations.
The company’s debt-to-EBITDA ratio was 9.0 in the first quarter. One of its covenants says the ratio should not have exceeded 7.5 in the first half of 2013.
Net debt to core profit (EBITDA) ratio, a measure of a company’s ability to pay off debt, stood at 11.8 at Rusal in the first six months of the year and at 4.0 at Evraz.
The Russian rouble weakened on Monday, weighed down by persistent capital outflows. The tax payment period may provide temporary support.
“There are many exporters, but quite large outflows take place as well,” said Mikhail Palei, a dealer at VTB Capital. “The nature of the outflows is unclear. One reason is it could be connected to the central bank’s intentions to close dubious banks.”
Russia’s central bank last week withdrew the licence of Moscow-based Master Bank, charging it with breaking anti-money laundering laws and false accounting, among other things.
The rouble was down 0.5 percent at 32.91 to the dollar and 0.4 percent weaker at 44.51 per euro. It was 0.4 percent lower against the euro-dollar basket at 38.13.
Oil prices fell 1 percent on Monday but remained at a comfortable level for the Russian budget of $109.9 per barrel of Urals .
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