The FINANCIAL — Mechel investor James Justice and his family plan to sell some $300-400 million worth of preferred shares in the Russian leading coking coal and steel producer on Russian stock exchanges, Kommersant business daily reported on April 11, according to RIA Novosti.
The volume of the share placement by the U.S. businessman and his family will be determined after Mechel publishes its 2010 financial statements on April 11. Meetings of investors with the company's management are scheduled for April 14. Mechel declined to comment, the paper said.
The Justice family sold U.S. coal producer Bluestone Coal Corp. to Mechel in 2008 for $436 million in cash and 83.3 million Mechel preferred shares (15% of the company's equity). Another 55.5 million preferred shares (10% of equity) were retained by Mechel's subsidiary, Skyblock Limited. Both Mechel and the Justice family agreed to float their shares when market conditions improved.
The Justice family currently owns about 56.7 million Mechel preferred shares. The family sold a total of 25.7 million shares represented by GDRs in May and December 2010 on the NYSE for about $396 million. Russia is the sole venue for the Justice family to sell their shares as Mechel has used up its limit for the issue of GDRs, the paper said.
The transaction, if it goes through, will be the second placement of preferred shares in the Russian metals industry, analyst Oleg Petropavlovsky with BCS brokerage told the paper.
"Preferreds are quite a popular instrument in Russia as they offer guaranteed income and the demand for Mechel paper is expected to be strong," he said, adding that Mechel's dividend payments on preferred stock amounted to 20% of the company's net profits.
The Justice family's entire share package was worth $1.3 billion based on market prices at yesterday's close. However, the family will hardly be able to sell the stock at this price, Petropavlovsky said.
Preferred shares are normally traded at a 30% discount to ordinary shares and Justice will be unable to sell the whole share package at once. Mechel stock trading volumes in Russia are small compared to liquid trade on the NYSE and so the real share package offer could amount to $300-400 million, Petropavlovsky said.
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