Agroton wants deeper restructuring of its USD 50 mln notes

Ukrainian farmer Agroton (AGTPW) reported on November 25 it lacks sufficient cash flow to smoothly pay its coupon (payable in February) on USD 50 mln notes. The company blames an unresolved issue with the Bank of Cyprus, where the company kept USD 4.5 mln, out of which it received USD 0.3 mln, completely lost USD 1.0 mln, had to convert USD 1.6 mln into equity and is still unable to receive the remaining USD 1.6 mln. Another reason cited by the company is poor weather conditions, with a less-than-expected harvest in 2013 and worsened outlook for next year’s harvest.



Agroton is going to disclose at a later date new terms for restructuring its notes, the company concluded in its November 25 release. The next day, the Kommersant-Ukraine newspaper cited anonymous sources in reporting the new restructuring terms may include a decreased coupon rate to 6% (from 8%) and a postponement of coupon payments (due in February 2014) by one year.



In July 2013, the company had initiated a bond restructuring, blaming the same issues that were listed yesterday. The result was the August approval of the following conditions: a coupon rate cut to 8.0% from 12.5%, a postponement of the July 2013 coupon payment till February 2014 and a prolongation of the bond’s maturity from July 2015 to July 2019.



Alexander Paraschiy: We clearly see no fundamental reasons for new restructuring. Given the company’s latest harvest results and prices, Agroton should have generated more than its initially expected cash flow from the harvest sale of wheat and sunflower, its two key crops: USD 38.8 mln to USD 45.7 mln, vs. the company’s July’s estimate of USD 37.9 mln.



The only new excuse that Agroton provided this time is a smaller harvest outlook for the next season (though it’s not clear compared to what it is smaller). But that harvest cannot affect the company’s liquidity position in February (when the coupons are payable), as the harvesting campaign will only start in June-July 2014.



We see a disturbing link between a possible USD 10 mln loan given by Agroton to its main shareholder in July 2013 (refer to our note of September 9 for more details) and the company’s inability to service its financial obligations. We reiterate our position that Agroton is a company that no one should trust (at least under the current ownership profile), the securities of which have very little intrinsic value.

Источник: Конкорд Капитал