TIDMEVR
RNS Number : 5599P
Evraz Plc
29 May 2018
Proposed guarantee of the obligations of MC EVRAZ Mezhdurechensk
LLC ("EVRAZ Mezhdurechensk"), an indirect wholly owned subsidiary
of EVRAZ plc (the "Company" and together with its subsidiaries the
"Group"), under certain management contracts and publication and
posting of shareholder circular
The Company announces that on 29 December 2017 its indirect
wholly owned subsidiary, EVRAZ Mezhdurechensk entered into
management contracts (the "Management Contracts") with nine
companies owned by LLC Sibuglemet Group involved in mining,
processing and trading coal (the "Counterparties").
This followed a tendering process in August 2017 where EVRAZ
Mezhdurechensk emerged as the successful bidder to manage and
operate the mines, open pit mines, enrichment plants and coal
trading companies on behalf of the Counterparties. EVRAZ
Mezhdurechensk previously entered into nine separate management
contracts in December 2015 with the Counterparties on a similar
basis and the Management Contracts relate to the future provision
of the management services. The fees payable to EVRAZ
Mezhdurechensk under the Management Contracts comprise a fixed fee,
a variable fee (which depends on the coal prices, EBITDA and free
cash flow of the Counterparties and is payable in full if certain
key performance indicators ("KPIs") are satisfied) and a long-term
bonus arrangement (based on performance).
The Management Contracts require EVRAZ Mezhdurechensk to pay
certain amounts to the Counterparties by way of liquidated damages
if EVRAZ Mezhdurechensk is in breach of certain provisions of the
Management Contracts. On the basis that EVRAZ Mezhdurechensk is a
subsidiary without substantial assets, the Management Contracts
require the Company and its indirect subsidiary, JSC EVRAZ
Consolidated West-Siberian Metallurgical Plant, to enter into a RUB
30 billion (US$ 488.5 million million) joint guarantee of EVRAZ
Mezhdurechensk's obligations under the Management Contracts (the
"Proposed Guarantee").
Due to its size, the Proposed Guarantee is a "class 1"
transaction for the purposes of the Listing Rules of the Financial
Conduct Authority and requires shareholders' approval. A
shareholder circular (the "Circular") relating to the Proposed
Guarantee has been approved by the UK Listing Authority.
As the Proposed Guarantee will not be provided by 28 May 2018,
EVRAZ Mezhdurechensk will incur financial penalties of RUB 1
million per day (approximately US$ 16,000) under each Management
Contract from 29 May 2018 until the earlier of (a) such time when
the Proposed Guarantee is provided or (b) the date as of which the
Management Contracts are terminated. As set out below, the Proposed
Guarantee is subject to the approval of the Company's shareholders.
The financial penalties that EVRAZ Mezhdurechensk will incur from
29 May 2018 until the date of the general meeting of its
shareholders to consider the Proposed Guarantee will equal RUB 198
million (US$ 3.2 million). If such approval is not obtained, the
Company will procure that EVRAZ Mezhdurechensk exercises its right
to terminate each of the Management Contracts by giving 180 days'
notice and further financial penalties accrued up to the date of
termination will be payable by EVRAZ Mezhdurechensk. The maximum
additional financial penalties payable by EVRAZ Mezhdurechensk
under the Management Contracts would be RUB 1,620 million (US$ 26.4
million). The aggregate financial penalties payable by EVRAZ
Mezhdurechensk in the event of termination of the Management
Contracts would therefore be RUB 1,818 million ((US$ 29.6
million).
The Board believes that the Proposed Guarantee is in the best
interests of the Company and shareholders as a whole for the
following reasons:
-- the Proposed Guarantee and ongoing performance of the
management services under the Management Contracts (the "Management
Services") supports the overall strategy of the Group:
o it creates mutual synergies for Sibuglemet and the Group;
o it helps to stabilise the coal mix at the Group's steelmaking
plants;
o it provides the Group with more flexibility for its customers,
enabling it to sell a wider range of coal grades;
o it creates logistical synergies and allows the Group to
optimise the use of coal washing capacities and facilitate sharing
of operational best practices across multiple production
facilities; and
o it will establish a deeper partnership with Sibuglemet and
allow the Group to explore new strategic options in relation to the
coal assets of Sibuglemet, with the aim of increasing the security
of supply of all coal grades required for its operations;
-- performing the Management Services provides the Group with
ready access to the raw materials and coking coal necessary for it
to stabilise its steel production in line with the Group's growth
strategy;
-- the management fees payable under each of the Management
Contracts and the bonus element payable on conclusion of the
Management Contracts will, if paid, increase the Group's earnings;
and
-- the potential liabilities arising under the Management
Contracts which are subject to the Proposed Guarantee are within
the control of EVRAZ Mezhdurechensk which has existing expertise
and has been providing the Management Services to the
Counterparties since 2015. Accordingly, EVRAZ Mezhdurechensk has
already demonstrated its ability to manage the Counterparties and
their underlying assets effectively and the Directors have no
reason to believe that EVRAZ Mezhdurechensk would engage in any
activity in breach of the Management Contracts. In addition, the
Group has a sound control environment and appropriate corporate
governance and board policies in place which it continues to review
and enhance. These policies and procedures include preventative and
detective activities, periodic risk assessment and other procedures
which are designed to protect the Group's assets. These procedures
and policies are observed by EVRAZ Mezhdurechensk.
Copies of the Circular will be posted to the Company's
shareholders by no later than 29 May 2018. The Proposed Guarantee
is subject to the approval of the Company's shareholders, and
accordingly, the Circular contains a notice convening a general
meeting, which is to be held at 9:30 a.m. on 19 June 2018 at
Chelsea Football Club, Stamford Bridge, Fulham Road, London SW6
1HS. Shareholders may appoint a proxy by completing the form of
proxy enclosed with the Circular. Alternatively, proxy appointments
may be completed electronically. The procedures and timings for the
appointment of a proxy are set out in the notes to the notice of
the general meeting at the back of the Circular.
The Circular will be made available on the Company's website
www.evraz.com and will be submitted to the National Storage
Mechanism, where it will be available for inspection at
www.morningstar.co.uk/uk/NSM. Copies of the Circular will also be
available for inspection during usual business hours on any
business day, free of charge, at the offices of Morrison &
Foerster (UK) LLP, City Point, One Ropemaker Street, London EC2Y
9AW from the date of this announcement up to and including the date
of the General Meeting.
For further information:
Media Relations: Investor Relations:
London: +44 207 832 8998 Irina Bakhturina
Moscow: +7 495 937 6871 Director, Investor Relations
media@evraz.com London: +44 207 832 8990
Moscow: +7 495 232 1370
ir@evraz.com
IMPORTANT NOTICE
Morgan Stanley & Co. International plc ("Morgan Stanley"),
which is authorised by the Prudential Regulation Authority (the
"PRA") and regulated by the Financial Conduct Authority and the PRA
in the United Kingdom, is acting as sponsor and broker to EVRAZ plc
and no one else in connection with the Circular. In connection with
such matters, Morgan Stanley, its affiliates and their respective
directors, officers, employees and agents will not regard any other
person as their client, nor will they be responsible to anyone
other than EVRAZ plc for providing the protections afforded to
clients of Morgan Stanley nor for providing advice in connection
with the Circular, the contents of this document or any matter
referred to herein.
Apart from the responsibilities and liabilities, if any, which
may be imposed upon Morgan Stanley by the Financial Services and
Markets Act 2000 or the regulatory regime established thereunder,
Morgan Stanley does not accept any responsibility whatsoever or
make any representation or warranty, express or implied, concerning
the contents of this document, including its accuracy, completeness
or verification, or concerning any other statement made or
purported to be made by it, or on its behalf, in connection with
the Company and the Circular, and nothing in this document is, or
shall be relied upon as, a promise or representation in this
respect, whether as to the past or future. Morgan Stanley
accordingly disclaims, to the fullest extent permitted by law, all
and any responsibility and liability whether arising in tort,
contract or otherwise (save as referred to herein) which it might
otherwise have in respect of this document or any such
statement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCGMGZKZLNGRZM
(END) Dow Jones Newswires
May 29, 2018 08:08 ET (12:08 GMT)
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