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Bankruptcy most likely scenario for indebted Mechel-economy minister

(Reuters) - Russian Economy Minister Alexei Ulyukayev said on Saturday that bankruptcy was the most likely scenario for the over-indebted steelmaker Mechel .

"It is very difficult to suggest any other reasonable solution. We should probably admit the fact - if a company is bankrupt, it should be legally acknowledged," Ulyukayev told reporters.

Russian officials have been looking at ways of helping Mechel, which has debts of $8.6 billion and 70,000 workers, for months, including the sale of a railroad to the company's Elga coal mine in Russia's far east to state Russian Railways.

Ulyukayev said there were was no money to finance the buyout of the railroad, adding there probably was no other way than to declare Mechel bankrupt.

"It is a high risk for the banks, of course, they will write off reserves but there is no other way. I think we will have to go this way," Ulyukayev told reporters on the sidelines of an economic forum in the Black Sea resort of Sochi.

Mechel itself is considering selling its core assets for between $2 billion and $3 billion over two or three years and wants its main creditor banks - VTB, Sberbank and Gazprombank - to restructure its debt.

Andrei Kostin, the chief executive of VTB, said on Friday that debt restructuring would not help Mechel in the long term and that VTB would have to take legal action to recover debts from the ailing miner after its proposal to convert part of Mechel's debt into shares was rejected. (Reporting by Darya Korsunskaya; Writing by Maria Kiselyova; Editing by Elaine Hardcastle)

http://www.reuters.com/article/2014/09/20/russia-mechel-bankruptcy-idUSL6N0RL0CL20140920