Severstal has completed its U.S.$1bln Eurobond offering

OAO Severstal has reduced its indebtedness under a loan agreement with Steel Capital S.A. made in July 2008 (the “2008 Loan”) by U.S.$706,448,000 in the aggregate principal amount.

The 2008 Loan was financed by the issuance by Steel Capital S.A. (the “Issuer”) on 29 July 2008 of U.S.$1,250,000,000 9.75% Loan Participation Notes due 2013 (Regulation S ISIN Code: XS0376189857, Rule 144A ISIN Code: US858057AA01) (the “2008 Notes”).

On 25 October 2010, the Issuer completed the issuance of its U.S.$1,000,000,000 6.70% Series 1 Loan Participation Notes due 2017 (Regulation S ISIN Code: XS0551315384, Rule 144A ISIN Code: US858057AC66) (the “Notes”) under its U.S.$3,000,000,000 Loan Participation Note Programme. The Notes were issued for the sole purpose of financing a loan to Severstal. The Notes were admitted to trading on the Main Market of the London Stock Exchange on 26 October 2010.

The Issuer has on-lent the proceeds from the issue of the Notes to Severstal. Severstal has applied the borrowed funds for refinancing of its existing indebtedness, including a partial redemption of the 2008 Loan (the “Redemption”).

The Redemption was achieved by way of a repurchase by Chatham Enterprises Limited (the “Purchaser”), a BVI-based wholly-owned subsidiary of Severstal, of the 2008 Notes in the aggregate principal amount of U.S.$706,448,000 from their holders through a tender offer under the terms set out in the Offer to Purchase Memorandum released by the Purchaser on 29 September 2010. The total amount of funds from the issue of the Notes utilised for the purposes of the Redemption, including the payment of the principal debt, accrued interest and applicable market premium (but excluding various professional fees and expenses), amounted to approximately U.S.$812,000,000.

Following the Redemption, the outstanding aggregate principal amount of the 2008 Notes (and, accordingly, the outstanding principal amount under the 2008 Loan), has been reduced to U.S.$543,552,000 representing approximately 43.5% of the originally issued aggregate principal amount of the 2008 Notes.

Daria Kim, the head of Severstal’s treasury, comments on the issue of the Notes and the Redemption as follows:

“The success of this transaction is due to three main factors: right strategy, timing and excellent execution. We achieved our goals on both the new issue and tender offer side, providing the company with long term financing at an attractive rate while proactively managing future debt maturities”.

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This announcement is directed at and/or for distribution in the United Kingdom only to (i) persons who have professional experience in matters relating to investments and who are investment professionals within the meaning of article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), (ii) high net worth entities falling within article 49(2)(a) to (d) of the Order and (iii) any other persons to whom this announcement may otherwise lawfully be directed (all such persons being together referred to as “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be available only to and will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this announcement or any of its contents. Any investment or investment activity to which this announcement relates is available only to relevant persons and will be engaged in only with relevant persons. Persons distributing this announcement must satisfy themselves that it is lawful to do so.

This announcement is not an offer of any securities or an advertising of any securities in the Russian Federation; the Notes are not contemplated to be placed or publicly circulated in the Russian Federation (in terms of the Federal Law No.39−FZ On Securities Market dated 22 April 1996 (as amended), the Federal Law on Advertising No.38−FZ dated 13 March 2006 (as amended) and the Federal Law on Protection of Rights and Lawful Interests of Investors in the Securities Market No.46−FZ dated 5 March 1999 (as amended).