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


  • Chirkova, Elena, ,

    (National Research University Higher School of Economics)

  • Valieva, Dinara

    (“Earnest and Young”)

  • Menshikov, Yuri

    (“Earnest and Young”)

  • Nosova, Alexandra

    (Russian Valuation Service)


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

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. 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.
    4. Giammarino, Ronald M, 1989. "The Resolution of Financial Distress," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 25-47.
    5. 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.
    6. 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.
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    More about this item


    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


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