Mechel and Gazprombank entered into a settlement agreement on debt restructuring

Mechel and Gazprombank entered into an amicable agreement on debt restructuring. It will allow the metallurgical company to reduce its debt burden, and the bank will receive repayment of the debt, excluding BNP Paribas. According to experts, the parties could have concluded a settlement agreement out of court, but going to court benefited both parties.

Gazprombank entered into an amicable agreement with Mechel and its member Chelyabinsk Metallurgical Plant (ChMK) on the restructuring of loan obligations, the parties announced on September 25. The decision on the settlement was approved by the Ninth Arbitration Court of Appeal.

The court satisfied lawsuit Gazprombank on the recovery of $244.2 million from Mechel and ChMK on July 17. This amount includes $154.8 million in principal and $89.4 million in interest. The loan agreement that became the basis for the lawsuit was concluded in 2010 between Mechel and the French bank BNP Paribas, the funds were used for the construction of a universal rail and beam mill at ChMK. Gazprombank provided financing to the French bank, which, in turn, provided loans to ChMK. Mechel acted as guarantor for the loan. The funds were supposed to be repaid by 2019, but the last principal payment was received in 2014.

Gazprombank justified its demands by a presidential decree, according to which Russian banks were allowed to demand repayment of loan debt directly from the debtor, bypassing a foreign financial agent, while Mechel objected, stating that the loan was not syndicated and only BNP Paribas had the right to claim.

The court recognized ChMK and Mechel as obligated persons to Gazprombank, the amount should have been recovered from the defendants in rubles at the Central Bank exchange rate on the date of payment. But at the end of last week it became known that the parties were asking the court to approve the settlement agreement.

According to the bank, the settlement agreement provides for the payment of the debt within two years on terms comfortable for the parties, the conversion of the debt into rubles and the forgiveness of part of the total debt. This will allow Mechel to reduce its debt burden and reduce outstanding loan obligations in its loan portfolio from 15% to 3%, Gazprombank added.

The bank also acquired all rights from the lender and external participants under the loan agreement dated 2010, concluded between ChMK and foreign banks. The loan consisted of three tranches, the principal amount of which as of the settlement date was $154.9 million and €154.7 million. The bank took a constructive position, which allowed the company to restructure the loan debt not only in part of the tranche provided by Gazprombank, but also in full for all three tranches, Mechel said in a statement.

“On the surface is Gazprombank’s desire to exclude BNP Paribas from the chain of settlements aimed at repaying debt,” notes Ilya Zharsky, managing partner of the Veta expert group. He believes that when concluding a settlement agreement, Mechel receives more comfortable conditions for repaying the debt simply due to the fact that the loan was provided in a currency that is now difficult to access, and its value has changed significantly since 2010 not in favor of the borrower . According to the lawyer, the parties could have resolved the issue without a lawsuit, but going to court is beneficial for the plaintiff and the defendant. The creditor confirmed the existence of the debt directly to himself, and the borrower received more comfortable conditions for repaying the debt, which can be secured by a settlement agreement and will be binding on the parties.

Evgeniy Zainullin