* Mechel expects to complete debt talks by end-Nov
* Mechel: Share price decline "speculative"
* Debt worries trigger stop losses - sources
By Douglas Busvine and Zlata Garasyuta
MOSCOW, Nov 13 (Reuters) - Russian mining group Mechel lost 40 percent of its market value in Moscow on Wednesday, hit by concerns over a proposed debt restructuring that the company called speculative.
Mechel, controlled by tycoon Igor Zyuzin, is struggling with a $9 billion debt load after an acquisition spree left it exposed to a slump in steel and coal prices, and unable to make disposals at good prices or pay for major investments.
Its shares also hit record lows in New York, with traders saying concerns over the company's debt woes triggered heavy selling by its creditor banks.
"There are lots of stop-loss orders," said Alexei Bachurin, chief cash equities trader at Renaissance Capital in Moscow.
Bachurin added that some Mechel bonds were yielding 100 percent. "If bonds are trading at 50-60 percent of par that means an immediate restructuring," he said.
Mechel has long been regarded as one of the Russian industrial groups vulnerable to a turn in the commodities cycle and a slowdown in Russia. Last year it put non-core assets up for sale but has struggled to make much of a dent in its debt.
Shares in the company have lost 96 percent since their peak in May 2008, just before President Vladimir suggested "sending round a doctor" because Zyuzin had missed a meeting with businessmen due to illness.
Traders said Mechel's top management had pledged shares at Russia's largest banks, and that the price slide had triggered a snowball of so-called margin calls, in which a bank sells shares held as security against loans.
Mechel asked creditors last month to agree a further relaxation on the terms of its debts, seeking covenant waivers for this year and 2014, both for itself and its mining division Mechel Mining, sources said at the time.
Talks with creditor banks on a covenant holiday and a debt restructuring were "going well", Mechel said in a statement, adding it expected them to be completed by the end of November.
"There are no negative events at the company," Mechel said, adding that it considered the decline in the company's share price to be "entirely speculative".
Mechel has not published its first-half financial results yet. Publication would have risked violating its loan covenants while the delay enables it to continue negotiations with its creditors, according to market sources.
One of the covenants states that Mechel's net debt to EBITDA ratio should not exceed 7.5 in the first half of 2013, while Mechel Mining's should be no more than 4.25. Mechel's debt-to-EBITDA ratio was 9.0 in the first quarter.
Its shares hit all-time lows before halving their losses to trade at $2.21 in New York, down by more than 20 percent. Its less-liquid Moscow shares ended down 41 percent at 56.3 roubles.
"We don't see any fundamental reason for such a share-price decline," said Ekaterina Trofimova, first vice-president at Gazprombank, a creditor that lent Mechel $1 billion earlier this year. Gazprombank is among the banks in loans talks with Mechel.
Mechel's efforts to sell non-core assets and financing of its key coal project, the Elga field in Siberia, show that the company has managed to stabilise the situation, Trofimova added.
Work on Elga, one of the world's largest coking coal reserves, has long been blighted by poor transport links. In September Mechel was granted a $2.5 billion loan from a state bank to continue the project.
Other market sources said, however, that stop-loss selling was driven by the very state-controlled banks that are Mechel's main creditors.
"Brokers are talking about rumours that the company plans to default, but that is odd - they don't have principal repayments on their debt until next year," said one analyst with a foreign bank in Moscow.
"It's possible that there was a wave of indignation from the creditor banks."