Mechel, one of the leading Russian mining and steel groups, has announced that it has reached an agreement with Russia's second largest bank in terms of assets, i.e., VTB Bank, for a three-year prolongation of the Ruble 15 billion (about $514.4 million) loan given to Mechel at the end of 2008.
Accordingly, the prolongation agreement provides for only interest payments during the first 2.5 years, followed by further monthly repayment of the principal debt.
"This prolongation agreement will allow Mechel to bring a significant share of its short-term loans into the long-term with amortized repayment schedule from funds sourced from operational activities of Mechel's plants," Mechel's CFO Stanislav Ploschenko stated.
As SteelOrbis previously reported, in December 2008 VTB Bank opened credit lines totaling Ruble 15 billion to Mechel's coal mining subsidiaries Yakutugol and Southern Kuzbass Coal Company, and to its steel producing subsidiary Chelyabinsk Metallurgical Plant. The loans were used to fund the operations of these companies. Initially, the credit period was just one year.
The prolongation in question is a one more step within the framework of the agreement on long-term mutually beneficial cooperation signed between Mechel and VTB Bank in April 2008, with a view to enabling the implementation of Mechel's projects and development plans.