Severstal launches $200 million offering of Senior Unsecured Convertible Bonds due 2021

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, INTO OR FROM THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, SOUTH AFRICA, JAPAN, THE RUSSIAN FEDERATION, CYPRUS OR INTO OR FROM ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE, NOR A SOLICITATION TO PURCHASE OR SUBSCRIBE FOR SECURITIES, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, CYPRUS OR THE RUSSIAN FEDERATION. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT

Severstal launches $200 million offering of Senior Unsecured Convertible Bonds due 2021

26 April 2016

PAO Severstal (“Severstal” or the “Company”) (LSE: “SVST”; MICEX-RTS: “CHMF”) announces the launch of an offering (the “Offering”) of approximately U.S. $200 million principal amount of senior unsecured guaranteed convertible bonds due 2021 (the “Bonds”). The Bonds will be issued by Abigrove Limited (the “Issuer”), a special purpose vehicle incorporated under the laws of the Republic of Cyprus, and will be guaranteed by PAO Severstal (the “Guarantor”). The Bonds are, subject to a cash settlement option at the discretion of the Issuer, convertible into Global Depositary Receipts (“GDRs”) of Severstal listed on the London Stock Exchange, each representing one ordinary share of Severstal.

The Bonds are expected to carry a coupon of between 0 and 0.5 per cent per annum payable semi-annually in arrear. The conversion price is expected to be set at a premium of between 17.5 and 25 per cent to the reference price (being the volume weighted average price of a GDR on 26 April 2016). The conversion price of the Bonds will be subject to standard convertible market anti-dilution adjustments.

The Bonds will be issued and redeemed at 100 per cent of their principal amount and, unless previously redeemed, converted or cancelled, will mature on 29 April 2021. The Issuer will have the option to redeem all of the Bonds at any time after 20 May 2019 at their principal amount together with accrued interest, if the value of the GDRs deliverable on conversion of the Bonds exceeds 130 per cent of the principal amount of the Bonds over a specified period. Holders of the Bonds will have the option to require an early redemption of their Bonds on the third anniversary of the issue date, at their principal amount, together with accrued interest.

Bondholders will have the right, subject to a cash settlement option at the discretion of the Issuer, to convert their bonds into GDRs of Severstal at any point from 41 days after the issue date up to the close of business on the seventh dealing day prior to the final maturity date or if the Bonds shall have been called for redemption prior to the final maturity date, the date falling seven dealing days prior to the date fixed for redemption.

The Bonds will be offered and sold outside the United States in reliance on Regulation S of the US Securities Act 1933, as amended.

Severstal will make an application for the Bonds to be admitted to trading on the Open Market segment (Freiverkehr) of the Frankfurt Stock Exchange after settlement of the Offering.

The net proceeds of the issue will be used for the general corporate purposes of Severstal.

The pricing for the Offering is expected to take place later today and settlement of the Offering is expected to occur on or around 29 April 2016.

Citigroup Global Markets Limited, Deutsche Bank AG, London Branch, J.P. Morgan Securities plc and Société Générale Corporate & Investment Banking are acting as Joint Bookrunners and Joint Lead Managers in connection with the Offering.

Certain of the Joint Bookrunners, the Company and/or its affiliates will enter into stock lending arrangements on or around the date hereof in respect of GDRs representing approximately 3 per cent of the Company’s issued share capital for the purposes of facilitating investors’ hedging activities.

For more information, please contact:

Severstal Investor Relations:
Vladimir Zaluzhsky
Victor Drozdov
Tel: +7 (495) 926 7766

Severstal Public  Relations:
Vladimir Zaluzhsky
Anastasia Mishanina
Tel: +7 (495) 926 7766

PAO Severstal is one of the world’s largest vertically integrated steel and steel-related mining companies with its assets in Russia, Ukraine, Latvia, Poland and Italy. The company’s shares are listed at the Russian trading floor MICEX-RTS, global depository receipts are presented on the London Stock Exchange. Severstal reported revenue of $6,396 million and EBITDA of $2,096 million in 2015. Severstal’s crude steel production in 2015 reached 11.5 million tonnes.

Important Notice:

THIS DOCUMENT IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS DOCUMENT IS NOT AN OFFER TO SELL SECURITIES OR THE SOLICITATION OF ANY OFFER TO BUY SECURITIES, NOR SHALL THERE BE ANY OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE WOULD BE UNLAWFUL. THE SECURITIES MENTIONED IN THIS DOCUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED IN THE UNITED STATES UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "US SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES IN THE UNITED STATES OR IN ANY OTHER JURISDICTION.

NO ACTION HAS BEEN TAKEN BY THE ISSUER, THE GUARANTOR, THE JOINT LEAD MANAGERS OR ANY OF THEIR RESPECTIVE AFFILIATES THAT WOULD PERMIT AN OFFERING OF THE SECURITIES OR POSSESSION OR DISTRIBUTION OF THIS DOCUMENT OR ANY OFFERING OR PUBLICITY MATERIAL RELATING TO SUCH SECURITIES IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES ARE REQUIRED BY THE ISSUER, THE GUARANTOR AND THE JOINT LEAD MANAGERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY SUCH RESTRICTIONS.

THIS DOCUMENT AND THE OFFER WHEN MADE ARE ONLY ADDRESSED TO AND DIRECTED, IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHICH HAVE IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A "RELEVANT MEMBER STATE"), AT PERSONS WHO ARE "QUALIFIED INVESTORS" WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (DIRECTIVE 2003/71/EC), AS SUCH ARTICLE IS AMENDED BY DIRECTIVE 2010/73/EU ("QUALIFIED INVESTORS"). EACH PERSON WHO INITIALLY ACQUIRES ANY SECURITIES OR TO WHOM ANY OFFER OF SECURITIES MAY BE MADE WILL BE DEEMED TO HAVE REPRESENTED, ACKNOWLEDGED AND AGREED THAT IT IS A "QUALIFIED INVESTOR" WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE, AS SUCH ARTICLE IS AMENDED BY DIRECTIVE 2010/73/EU.

IN ADDITION, IN THE UNITED KINGDOM, THIS DOCUMENT IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT, QUALIFIED INVESTORS (I) WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER") AND QUALIFIED INVESTORS FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER, AND (II) TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS DOCUMENT MUST NOT BE ACTED ON OR RELIED ON (I) IN THE UNITED KINGDOM, BY PERSONS WHO ARE NOT RELEVANT PERSONS, AND (II) IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OTHER THAN THE UNITED KINGDOM, BY PERSONS WHO ARE NOT QUALIFIED INVESTORS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS COMMUNICATION RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.

THIS DOCUMENT AND INFORMATION CONTAINED THEREIN IS NOT AN OFFER, OR AN INVITATION TO MAKE OFFERS, TO SELL, EXCHANGE OR OTHERWISE TRANSFER SECURITIES IN THE RUSSIAN FEDERATION TO OR FOR THE BENEFIT OF ANY RUSSIAN PERSON OR ENTITY AND DOES NOT CONSTITUTE AN ADVERTISEMENT OR OFFERING OF SECURITIES IN THE RUSSIAN FEDERATION WITHIN THE MEANING OF RUSSIAN SECURITIES LAWS. INFORMATION CONTAINED IN THIS DOCUMENT IS NOT INTENDED FOR ANY PERSONS WHO ARE NOT "QUALIFIED INVESTORS" WITHIN THE MEANING OF ARTICLE 51.2 OF THE FEDERAL LAW NO. 39-FZ "ON THE SECURITIES MARKET" DATED 22 APRIL 1996, AS AMENDED (THE "RUSSIAN QIS") AND MUST NOT BE DISTRIBUTED OR CIRCULATED INTO RUSSIA OR MADE AVAILABLE IN RUSSIA TO ANY PERSONS WHO ARE NOT RUSSIAN QIS, UNLESS AND TO THE EXTENT THEY ARE OTHERWISE PERMITTED TO ACCESS SUCH INFORMATION UNDER RUSSIAN LAW. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED IN RUSSIA AND ARE NOT INTENDED FOR "PLACEMENT" OR "CIRCULATION" IN RUSSIA (EACH AS DEFINED IN RUSSIAN SECURITIES LAWS) UNLESS AND TO THE EXTENT OTHERWISE PERMITTED UNDER RUSSIAN LAW.

THIS DOCUMENT DOES NOT CONSTITUTE INVESTMENT ADVICE OR A RECOMMENDATION UNDER CYPRUS LAW, NOR DOES IT CONSTITUTE AN OFFER OR ADVERTISEMENT OF SECURITIES IN CYPRUS, IT IS NOT INTENDED TO BE AND MUST NOT BE DISTRIBUTED VIA INFORMATION DISTRIBUTION CHANNELS OR TO THE PUBLIC IN CYPRUS, NOR (WHEN DISTRIBUTED BY A DULY LICENSED INVESTMENT FIRM ESTABLISHED OR OPERATING THROUGH A BRANCH IN CYPRUS) TO ANY PERSON IN CYPRUS OTHER THAN A “PROFESSIONAL CLIENT” AS DEFINED IN THE LAW ON INVESTMENT SERVICES AND ACTIVITIES AND REGULATED MARKETS (LAW NO. 144 (I) 2007) AS AMENDED OR REPLACED FROM TIME TO TIME.

THIS DOCUMENT MAY NOT BE USED FOR ANY INVITATION OR SOLICITATION PURPOSES FOR OR IN CONNECTION WITH THE SALE, MARKETING, OFFERING OR ACQUISITION OF THE SECURITIES IN CYPRUS IN CIRCUMSTANCES UNDER WHICH IT IS UNLAWFUL UNDER CYPRUS LAWS TO MAKE SUCH AN INVITATION OR SOLICITATION.