By Anastasia Lyrchikova and Andrey Kuzmin
MOSCOW (Reuters) - Russian metals and mining giant Mechel (MM:MTLR) plans to sign a final debt-restructuring deal in early 2017, its chief financial officer told Reuters, concluding more than two years of negotiations on a burden that has threatened its survival.
Mechel borrowed heavily before Russia's economic crisis and struggled to keep up repayments as demand for its products weakened alongside tumbling coal and steel prices.
Before reaching restructuring agreements on the bulk of its debt earlier this year, the company, controlled by businessman Igor Zyuzin, was facing a bankruptcy which would have amounted to Russia's biggest ever corporate collapse.
Chief Financial Officer Sergei Rezontov told Reuters Mechel would soon agree terms with Russian bank VTB (MM:VTBR) to reschedule debt repayments for 2020-2022, having previously agreed to start repayments next year.
It will also conclude restructuring talks on $1.5 billion of credit owed to international lending syndicates, Rezontov said.
"Negotiations (with VTB) are currently ongoing, we expect to be ready for signing by the end of the year," Rezontov told Reuters in an interview at his office in Moscow.
The biggest part of Mechel's outstanding debt which hasn't been restructured is owed to two groups of creditors: $500 million to export credit agencies and $1 billion to a syndicate of international banks, he added.
"We hope that they (the banks) will be able to make credit decisions by the end of the year. There is every chance we will be able to sign at the beginning of next year."
After the agreements, Mechel will have to service $550-700 million in repayments in 2017, Rezontov said; $400-500 million in interest and $150-200 million in principal debt.
SOARING STOCK
Mechel's change of fortunes has been further supported by a spike in coking coal prices, which has sent the company's stock soaring to three-year highs.
Prices for coking coal - a key component in steel production - have doubled since July to more than $200 per tonne on expectations of lower supply. Mechel is Russia's second-biggest coal producer after market leader Evraz (L:EVRE).
Mechel's shares on the Moscow Exchange traded at 138.70 roubles per a share by 1045 GMT on Wednesday, down 4 percent from the previous session but up 54 percent since the start of the month and more than 100 percent since the beginning of 2016.
Rezontov said the increase in coal prices would support Mechel's earnings in the second half of the year and the company's increased market cap would strengthen its position in final negotiations with creditors.
"We hope that given this situation with the jump in value of the company and business, the banks will be more flexible," he said. "The value of the collateral held by the banks has substantially increased.
"Accordingly, we are not excluding the possibility of persuading the syndicate to look at their existing collateral one more time and make a revaluation."
(Additional reporting and writing by Jack Stubbs; Editing by Katya Golubkova and Alexandra Hudson) OLGBBUS Reuters UK Online Report Business News 20161026T130400+0000