(Adds final board decision)
By Alberto Alerigi and Silvio Cascione
SAO PAULO/BRASILIA, March 11 (Reuters) - The board of Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA on Friday approved a 1 billion reais ($279 million) capital increase proposed by shareholder Nippon Steel & Sumitomo Metal Corp, a source with direct knowledge of the matter said.
Three board members representing the other controlling shareholder, Italian-Argentinian Techint Group, voted against the move, said the same source, who asked for anonymity because he was not authorized to speak publicly on the matter.
Techint, which is at odds with Nippon over the management of Usiminas, had agreed to raising capital up to 500 million reais. Techint wanted Usiminas to strengthen its cash position with funds from its mining arm.
Usiminas said in a statement on Friday that it was still discussing a potential loan standstill agreement with banks.
Nippon Steel has been pressing hard to approve a capital increase for Usiminas, threatening to sue fellow shareholders if they block the motion, a source said last week.
Nippon Steel is hoping approval of the capital increase will convince Usiminas' main creditors to refinance the company's debt and grant a short-term grace period, helping the company to avoid filing for bankruptcy protection.
A previous board meeting in February ended with no agreement on the capital increase.
$1 = 3.6419 Brazilian reais Reporting by Silvio Cascione; Editing by Lisa Von Ahn, Grant McCool