Thursday, December 12, 2013

Seeking Alpha: Mechel Offers A Spin Of The Met Coal Roulette Wheel

No sense in beating around the bush - unless you believe something is going to prompt a serious upward turn in inflation, and particularly in the price of met coal, Russia's Mechel (MTL) is basically worthless today. It's virtually impossible to run a DCF analysis that suggests a positive fair value unless you're willing to assume much higher met coal prices and a high degree of forbearance on the part of lenders.

But to paraphrase from the classic comedy "Dumb and Dumber," I'm saying there's a chance. The majority of Mechel's debt is borrowed from Russian state banks and they do not appear particularly eager to take a hard line with the company - they don't want to have to recognize the losses on their own books, to say nothing of the political fallout of potentially throwing tens of thousands of people out of work. While I see it as much more likely that Mechel shuffles along as a corporate zombie, the hesitancy of the company's lenders gives it at least a shot of surviving to see better met coal and steel prices.

Click here for the full article:
Mechel Offers A Spin Of The Met Coal Roulette Wheel

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