IDEAS home Printed from https://ideas.repec.org/a/rnp/ecopol/ep1737.html
   My bibliography  Save this article

Debt Restructuring of the Russian Metallurgical Companies Caused by the Crisis of 2008

Author

Listed:
  • Chirkova, Elena, ,

    (National Research University Higher School of Economics)

  • Valieva, Dinara

    (“Earnest and Young”)

  • Menshikov, Yuri

    (“Earnest and Young”)

  • Nosova, Alexandra

    (Russian Valuation Service)

Abstract

In this case-study, we analyse debt restructuring conducted by Russian metallurgical companies Evraz, TMK, Mechel and Rusal, which necessity was caused by the rapid deterioration of their financial standing during the crisis of 2008. We summarize the terms of the primary debt restructuting and calculate gains and losses from the restructuring for the companies and their creditors. Under the gain of a debtor we understand reduction of the NPV of the future debt payments after the restructuring, and the increase of payments we treat as a loss. The opposite is true for the banks. We show that Rusal and Mechel gained from the restructuring, while Evraz and TMK had to pay for it. With the help of hindsight analysis, we came to the conclusion that the choice of creditors must be explained by the financial status of the debtors. Those companies that could pay for the restructuring paid for it, and those that could not service the debt on the initial terms got significant debt reliefs. Both companies that had extracted debt reductions from their creditors went through the debt restructuring again a few years later, and Mechel would probably need a third one. Thus, we showed that in the course of the debt restructuring the creditors acted rationally. In the course of our analysis, we also came to an additional conclusion that the creditors had not used Altman's Z-score, presumably, due to possessing more precise instruments of estimating the probability of the debtors’ bankruptcy. We also propose a methodological innovation for evaluating effectiveness of corporate restructuring, that is, we show how such a simple and widely known financial indicator as NPV can be used for this purpose.

Suggested Citation

  • Chirkova, Elena, , & Valieva, Dinara & Menshikov, Yuri & Nosova, Alexandra, 2017. "Debt Restructuring of the Russian Metallurgical Companies Caused by the Crisis of 2008," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 174-209, June.
  • Handle: RePEc:rnp:ecopol:ep1737
    as

    Download full text from publisher

    File URL: ftp://w82.ranepa.ru/rnp/ecopol/ep1737.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Joe Peek & Eric S. Rosengren, 2005. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," American Economic Review, American Economic Association, vol. 95(4), pages 1144-1166, September.
    2. Gilson, Stuart C, 1997. " Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms," Journal of Finance, American Finance Association, vol. 52(1), pages 161-196, March.
    3. Inoue, Kotaro & Kato, Hideaki Kiyoshi & Bremer, Marc, 2008. "Corporate restructuring in Japan: Who monitors the monitor?," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2628-2635, December.
    4. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    5. Gilson, Stuart C. & John, Kose & Lang, Larry H. P., 1990. "Troubled debt restructurings*1: An empirical study of private reorganization of firms in default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 315-353, October.
    6. Giammarino, Ronald M, 1989. "The Resolution of Financial Distress," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 25-47.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    2008 financial crisis; bankruptcy; corporate debt; corporate debt restruñturing; metallurgical companies; Russia;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnp:ecopol:ep1737. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RANEPA maintainer). General contact details of provider: http://edirc.repec.org/data/aneeeru.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.