Moody's: Mechel to negative

Moody's Investors Service said it changed the outlook for Mechel OAO to negative from stable in response to the company's disclosure that it was close to tripping a financial covenant in its debt agreements.

The covenant limits net debt-to-EBITDA to 3.5x, the agency said.

The company also announced that, as a means of controlling cash outflows and the need for increased debt, it will scale back its capital expenditures, keep a close eye on working capital and emphasize the sale of products with higher turns and higher margins, the agency said.

Mechel's B1 corporate family rating reflects its aggressive capital structure, with relatively high leverage and modest cash flow metrics and the group's ongoing refinancing risk, Moody's said.

The rating also considers Russia's still-developing economic, operating and legal framework.

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