OREANDA-NEWS. November 02, 2010.  Severstal (“Severstal”) has reduced its indebtedness under a loan agreement with Steel Capital S.A. made in July 2008 (the “2008 Loan”) by USD 706,448,000 in the aggregate principal amount.

The 2008 Loan was financed by the issuance by Steel Capital S.A. (the “Issuer”) on 29 July 2008 of USD 1,250,000,000 9.75% Loan Participation Notes due 2013 (Regulation S ISIN Code: XS0376189857, Rule 144A ISIN Code: US858057AA01) (the “2008 Notes”).

On 25 October 2010, the Issuer completed the issuance of its USD 1,000,000,000 6.70% Series 1 Loan Participation Notes due 2017 (Regulation S ISIN Code: XS0551315384, Rule 144A ISIN Code: US858057AC66) (the “Notes”) under its USD 3,000,000,000 Loan Participation Note Programme. The Notes were issued for the sole purpose of financing a loan to Severstal. The Notes were admitted to trading on the Main Market of the London Stock Exchange on 26 October 2010.

The Issuer has on-lent the proceeds from the issue of the Notes to Severstal. Severstal has applied the borrowed funds for refinancing of its existing indebtedness, including a partial redemption of the 2008 Loan (the “Redemption”).

The Redemption was achieved by way of a repurchase by Chatham Enterprises Limited (the “Purchaser”), a BVI-based wholly-owned subsidiary of Severstal, of the 2008 Notes in the aggregate principal amount of USD 706,448,000 from their holders through a tender offer under the terms set out in the Offer to Purchase Memorandum released by the Purchaser on 29 September 2010. The total amount of funds from the issue of the Notes utilised for the purposes of the Redemption, including the payment of the principal debt, accrued interest and applicable market premium (but excluding various professional fees and expenses), amounted to approximately USD 812,000,000.

Following the Redemption, the outstanding aggregate principal amount of the 2008 Notes (and, accordingly, the outstanding principal amount under the 2008 Loan), has been reduced to USD 543,552,000 representing approximately 43.5% of the originally issued aggregate principal amount of the 2008 Notes.

Daria Kim, the head of Severstal’s treasury, comments on the issue of the Notes and the Redemption as follows:

“The success of this transaction is due to three main factors: right strategy, timing and excellent execution. We achieved our goals on both the new issue and tender offer side, providing the company with long term financing at an attractive rate while proactively managing future debt maturities”.

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