New reports have emerged concerning the Italian steel company Lucchini and its owner, the Russian Alexei Mordashov, as well as the banks involved in the company rescue plan.
Based on a report published by the Italian newspaper Il Sole 24 Ore, Mordashov has allegedly put pressure on the banks, excluding the possibility of a meeting unless they accept his new conditions. Mordashov's requests are: 1) the conversion of €200 million of the company's debts into bank loans (as opposed to the €150 million offered by the banks a few weeks ago); 2) the presence of an additional advisor - appointed by him - on the group's board of directors after its reorganization, in order to maintain the control over the company; 3) the immediate sale of its subsidiary AscoMetal, the revenue of which will go to Severstal (Mordashov's Russian giant, which had controlled Lucchini until last June) to pay off debts. If these demands are not met, Mordashov will refuse to attend the planned meeting in Moscow on February 2. These conditions seem too difficult for the creditor banks to accept them. Thus, the summit in question - which is considered to be crucial to finding a solution to the Lucchini difficulties - risks being cancelled.
In recent weeks, the solution to the issue seemed to be closer. A few days before Christmas, the banks said they did not want to become shareholder in exchange of a reduction of the debt of the Italian steel group (which amounts to €700 million). BNP Paribas, UniCredit and Intesa San Paolo had accepted the rescue package, which planned new finance of €150 million euro through recapitalization and partner capital loans, the conversion of company debts into bank loans, and new credit lines. This way the banks would have accepted to convert €150 million (instead of the €200 million currently sought by Mordashov) without receiving 35 percent of the capital. Consequently, Mordashov would have remained the sole owner of the company. However, in the event of sale of the company, the banks demanded a share in the revenue depending on ranking (the so-called ‘waterfall repayment', according to which the group of creditors would have been refunded first, and then the banks would have been repaid). The condition for the realization of this scenario would be the sale of the group, and this seems difficult since Lucchini had already been put on sale a year ago, without success.
Mordashov is now putting the whole rescue plan in question, giving the banks in a blunt choice - accept his three demands or reject the rescue package.