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. Last Updated: 07/27/2016

Steel Shares Collateral Plan Ditched

Magnitogorsk Steel shareholders who had hoped to use 25 percent of the steel plant's shares as collateral for a $105 million loan from the European Bank of Reconstruction and Development have officially thrown in the towel.

It seems, officials said, that they no longer own the shares.

A shareholders meeting Friday produced the latest chapter in a battle between management groups, one supporting use of the EBRD loan to revamp the steel plant, the other backing a former director who was ousted for his opposition to the loan.

At the meeting, shareholders in Magnitogorsk Steel, or MS, a holding company that began managing the plant's shares in 1995, were to decide whether to go forward with a plan to use the shares as collateral for the loan. But they dropped the issue when it "turned out that the shares had already been sold to third parties," said Stanislav Rukhmalev, a spokesman for the plant.

The plant's management now is trying to persuade the EBRD to unlock the much-needed loan without using the shares for collateral, Rukhmalev said.

An EBRD spokesman said Monday the bank had no specific details regarding Friday's meeting and could not comment on the issue.

The deal to use the plant's shares as collateral was concluded in October but immediately ran into opposition from Rashit Sharipov, chairman of the plant and general director of MS, who claimed the loan's conditions would be ruinous to the plant's finances.

Sharipov resisted the agreement by refusing to hand over the shares, which had been transferred to MS by the plant in 1995.

For his refusal, Sharipov was sacked from both of his posts in January, but that didn't stop his supporters from holding their own simultaneous meeting at a different building in Magnitogorsk on Friday. Each group relied on its own register of shareholders and elected different boards of directors, according to officials from both camps.

Sharipov's problems have only multiplied since his January ouster. Company officials and prosecutors said he became the subject of criminal charges brought last month by the regional prosecutor of Chelyabinsk, where the plant is located.

Yevgeny Davydov, vice president of Inkombank and chairman of MS, told shareholders Friday that the city prosecutor of Magnitogorsk issued a warrant for Sharipov's arrest March 6, according to a company press release. In the past, company officials have said the criminal charges allege abuse of official powers and disobeying court orders -- specifically, court orders not to sell the shares that had been entrusted to him.

But a company official sympathetic to Sharipov has said no arrest warrant was issued, and Monday, Anatoly Taranenko, Magnitogorsk's city prosecutor, declined to confirm or deny the existence of a warrant. Inkombank declined to comment on the situation Monday.

Another investigation by the regional prosecutor's office is looking into how 30 percent of plant shares were sold to two foreign companies, which in turn sold the shares to two foreign individuals, said Irina Sterlikova, a spokeswoman for the regional prosecutor of Chelyabinsk.

None of the parties would identify the companies or the individuals.

The investigators also are examining the roles of three senior officials at the Chelyabinsk stock registry who transferred the shares to a nominal holder's account in a Moscow bank after telling the bank that the shares -- frozen by the court -- were still in circulation, Sterlikova said.

But one senior official with MS who backs Sharipov argued Monday that the shares in question belonged to MS as part of its start-up capital. The official, who asked not to be identified, also said a Moscow court's decision in February suspended proceedings for Sharipov's replacement as the MS general director.