Top Russian steel producers borrowed more than $30 billion to make acquisitions and increase production during the precrisis boom, and Mechel is one of the most indebted, with total debt of $5.4 billion as of Dec. 31.
"There is substantial doubt about our ability to continue as a going concern," the company wrote in a key filing with the U.S. Securities and Exchange Commission.
It was the first report of a so-called "going concern" notice to a Russian company since the financial crisis hit, closing off debt markets and slashing demand for key export products such as steel.
The company added in the "risk factors" section of the 2008 20-F filing that it expected to refinance $3.5 billion in short-term debt and that it would secure adequate resources to continue "in operational existence for the foreseeable future."
A Mechel spokesman declined comment.
Mechel's shares were trading down about 2.4 percent at 1:52 p.m. in New York from Tuesday's close.
Mechel has breached covenants on $4.2 billion of loans, forcing it to -reclassify most of its debt as short-term.
The company last month said it agreed on new terms for a $1.5 billion bridge loan originally taken out to finance the acquisition of Kazakh chrome maker Oriel Resources. It will restructure $1 billion and repay the remainder with a Gazprombank loan.
"After the Oriel Resources roll forward, which we are currently assuming will take place, we estimate further refinancing requirements of $800 million by year-end 2009," Alfa Bank analyst Barry Ehrlich said.
Ehrlich said he included an assumption that any bank loans with covenant violations would not be called in.
In the SEC filing, the company said it also expected to successfully refinance or restructure a $2 billion syndicated loan used to acquire the Yakutugol coal mine in 2007.
"Our group is currently in negotiations with the consortium of banks, but it is likely that the terms and agreement on the conditions of these borrowing arrangements will not be completed until the second half of 2009," the filing said.
So far, only one bank, Germany's WestLB, has forced Mechel to make early repayment because of the covenant violations.
The document said WestLB requested early repayment of $84.8 million and that Mechel reached an agreement with the German bank to repay the funds on June 30, 2009.
A separate document filed with the SEC on June 19 revealed that majority owner Igor Zyuzin has put almost 38 percent of the company's shares up as collateral to obtain unspecified financing.
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