On 26 March 2009, Mechel OAO (Mechel) announced that it will start the public offering of its preferred shares from 01 April 2009, resulting in a 33.3% share dilution for its current equity holders. The company also announced that it has arranged a 2 month extension to its US$1.5 bn bridge loan. In light of ongoing concerns over the company’s high debt levels, we maintain our HOLD rating and will reassess our target price and rating in our next update report after the company releases its FY 2008 results. As the Russian stock trades in US dollars, we do not anticipate any currency impact over our investment horizon. Therefore, in line with the fundamental outlook for the company, we maintain our HOLD rating for the Russian stock. We will reassess our target price and rating in our next update report after the company releases its FY 2008 results.

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