Evaluation of the debt Restructuring Efficiency of Russian Metallurgical Companies

<p>The present study analyzes the effectiveness of debt restructuring of Russian metallurgical companies in 2008-2010 and examines the main factors that influenced the results of the restructuring. As part of this analysis the review of empirical research on the effectiveness of restructuring was made and the main approaches to estimate the success of the global financial crisis of 2008, which led to financial distress and debt restructuring of Russian metallurgical companies.</p><p>This research is based on the analysis of four metallurgical companies: Mechel, Evraz, Rusal and TMK, from 2004 to 2013. The analysis showed that after restructuring the debt burden of all companies has not decreased. Operating performance of all companies during two years after restructuring was lower than industry average. Three years after the restructuring Mechcel, Rusal and Evraz again appeared to be in financial distress. Comparative analysis of cash flows in case of liquidation or restructuring showed that when the discount rate to the value of total assets in case of liquidation is more than 50%, the yield of stakeholders from restructuring is higher than the yield from liquidation. Industry analysis along with an assessment of the&nbsp;performance of the companies allowed us to state the reasons of the unsuccessful debt restructuring. Primarily, a high impact of political motives on companies&#39; decisions, and debt restructuring, which is not accompanied by a restructuring of the company&#39;s assets, should be named.</p><p>In this study we suggest a series of measures to overcome the inefficiency of debt restructuring. The basic option is lobbing for improvements in the bankruptcy law, which will encourage Russian companies to restructure in court, thereby increasing its efficiency.</p>