The negative rating action follows the weakening financial position of the company due to its tremendous loan debt exceeding 8 billion US dollars, the net debt to EBITDA multiple being more than 11x (as of April 1, 2014). Furthermore, the opportunities for the Company to settle its debt without severe damage are almost entirely gone, as indirectly proven by the first major claim for a total amount of RUB 2.99 billion submitted to the Commercial Court of Moscow against Mechel by state-owned corporation Vnesheconombank, one of the company's principal lenders.

The adverse market conditions have made the heavy debt burden issue worse for Mechel OAO. The sliding prices and the shrinking demand for the Company's products both in the coal and metal segments entail major damages cutting into the holding's capitalization.

That said, AK&M Rating Agency still hopes to see the Company seize the opportunity to improve its financial standing benefiting from the recent upward trend in the global demand for coal products. As estimated by Russia's Ministry of Energy, exports of coal from Russia for the 8-month period in 2014 increased by 12.4% against the same period in 2013. Besides, demand for coking coals from Russian steelmakers also increased in August-September. Seeing as the Mechel Group includes two major Russian coal mining companies, the higher demand for coal offers certain opportunities to boost cash flows so as to repay some of the current debt and to strengthen the holding's financial profile.

Mechel OAO founded 2003 is one of the largest mining and metallurgical companies in Russia and worldwide. The Company is on the list of the backbone enterprises of Russia. Mechel OAO is a vertically integrated holding comprising four business segments (mining, metallurgical, ferroalloy industry and power engineering) with production assets in Russia and abroad. The Company's mining enterprises produce and sell coal, iron-ore concentrate and coke. Mechel's metallurgical companies are engaged in the production and sale of steel, rolled metal products, cast iron, and metal goods. The ferroalloy unit specializes in the production of ferrosilicon, ferrochrome and nickel. The group also owns commercial ports, as well as marketing, transport and power companies. At the beginning of 2014, Mechel's US GAAP assets amounted to USD 13.8 billion.

Official Company name: Mechel OAO.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

CJSC Analysis, Consulting and Marketing Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

CJSC AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.