Evraz Shares Soar on $1Bln VEB Loan

MTVEB's headquarters on Prospekt Akademika Sakharova. The loan to Evraz will help the company refinance debt.
Evraz Group shares climbed to their highest level in two weeks after the company got as much as $1.8 billion in loans from state-owned Vneshekonombank to help it refinance debt.

VEB will lend the Moscow-based company $1 billion, with an option for a further $800 million, Evraz said Thursday, without giving the terms.

Evraz Global Depositary Receipts advanced as much as $2.77 on Thursday, or 42 percent, to close at $9.30 in London.

The steelmaker has lost more than half its value this month on concerns over its ability to repay $9.6 billion of debt, equivalent to 75 percent of last year's revenue.

Evraz has spent almost $8 billion on acquisitions in the past two years to expand in the United States, South Africa, China and Ukraine.

"The VEB loan merely delays the situation," said Alexander Pukhayev, an analyst at VTB Capital in Moscow. "Still, I see a seasonal pickup in demand for steel in March, which should improve Evraz's cash flow."

Evraz has used $201.3 million of the lending to refinance short-term debt, it said today. The company needs $800 million this year to refinance a bridge loan for the $4 billion purchase of Ipsco's North American tube business, Pukhayev said.

The company cut output at steel mills in Russia and Ukraine by at least 25 percent in November as demand for the metal slumped. Severstal, a Russian steelmaker controlled by billionaire Alexei Mordashov, said Nov. 18 that its plants were working at half capacity.

Citigroup cut Evraz's rating to "sell" from "buy" because of "high levels of intangibles and goodwill on the balance sheet," analyst Daniel Yakub wrote in a Nov. 17 report. Goodwill is the excess paid in an acquisition above the market value of the net assets purchased.