Why Mechel OAO's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Russian steel maker Mechel OAO  (NYSE: MTL  ) jumped as much as 10.7% today after getting a potential lifeline from debt holders.

So what: The grace period and maturity of a $1 billion syndicated loan has been extended to 2014 and 2016 respectively. The company is having trouble paying back debt and was granted a waiver on another $1 billion loan on November 25, giving the company some breathing room.  

Now what: This extends Mechel's life a little longer but if the commodity market doesn't improve it won't matter. This doesn't fundamentally improve the company; it really just pushes bankruptcy off for a while. That's why I don't see this as a buy sign and would wait for a strong improvement in operations before jumping in.

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