MOSCOW, April 10 (Itar-Tass) - Mechel, one of the leading Russian mining and metals companies, announces signing an agreement with VTB Bank for a 40-billion-ruble (approximately 1.3-billion-U.S. dollars) loan (Based upon the Russian Central Bank exchange rate of 31.21 RUR/U.S. dollar as of April 10, 2013), Mechel said in a statement.

The total of VTB Bank’s loaned funds will be used to refinance Mechel Group’s current debt, so this loan will not increase its credit portfolio. Twenty-five billion roubles (some 800 million U.S. dollars) from these funds will be used to repay short-term debt in 2013, including loans from VTB Bank and Mechel’s rouble bonds. This will enable the Group to significantly improve its liquidity and bring down the risk of refinancing in the next 12 months.

The loan has a 15-month grace period followed by quarterly amortisation, with the final repayment date in 5 years after the agreement is signed. The interest rate will depend on Mechel Group’s net debt to EBITDA ratio and is due to decrease with the company’s deleveraging. Part of the interest rate will be up for capitalisation.

“VTB is our longstanding and reliable partner, and this deal is yet another proof of how productive our cooperation is. Securing a new credit agreement with VTB Bank will enable the company to refinance a large share of its loans which are due to be repaid in 2013, which will significantly improve the group’s debt structure in the next 12 months and afford us more flexibility in managing operational cash flow,” Mechel Chief Financial Officer Stanislav Ploschenko noted.

According to VTB’s Deputy President-Chairman of the Management Board Yuri Solovyov, “over the years of our cooperation, Mechel Group has shown itself to be a quality borrower. Working with mining and steel companies is a strategically important direction for VTB Group’s activities. We are ready to ensure a stable financial platform for successful development of our partners’ business.”

Mechel is one of the leading Russian companies. Its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, nickel, ferrochrome, ferrosilicon, steel, rolled products, hardware, heat and electric power. Mechel products are marketed domestically and internationally.