VAB Bank offers to restructure its June Eurobond

Ukrainian VAB Bank (VABANK) informed its bond holders that it intends to restructure the Eurobond maturing on June 14. According to the bank’s proposal, the restructured bond will be due on June 14, 2019. Its coupon rate, currently being 10.5%, is proposed to change to 9.0% from June 2014 to June 2015 and 10.9% afterwards. The bank also offers to repay 18% of par value of the notes in five equal quarterly installments between March 14, 2018 and March 14, 2019; and to repay the remaining 10% on the maturity date. VAB Bank offers a 0.5% consent fee to note holders who agree on the restructuring.

The proposal is subject to approval by ¾ of the voters attending the June 2 meeting, providing that a quorum at the meeting (2/3 of the total of the principal amount of the notes) is met.

VAB Bank has already restructured this bond back in June 2010. Following that deal, it repaid 10% of note outstanding (to decrease the debt to USD 112.5 mln from an initial USD 125 mln). It also increased the coupon rate from an initial 10.125% and turned from semi-annual to quarterly payments of coupons. According to the bank, the outstanding amount of the Eurobond is currently USD 88.3 mln.

Alexander Paraschiy: This is the third restructuring offer by Ukrainian issuers in 2014, after Agroton and Finance & Credit Bank. Unlike the first two issuers, which are clearly distressed businesses, VAB Bank looks much better, fundamentally. Its cash position as of end-March 2014 (USD 226 mln, at the current exchange rate) covers the Eurobond repayment by more than 2.5 times. Its deposit base and loan portfolio demonstrated remarkable double-digit growth in 1Q14. We see little reasons for bond holders to agree on the restructuring offer.

The apparent unwillingness to repay its bond adds more risks to other assets related to VAB Bank; egg producer Avangard (AVINPU), and integrated farming company Ukrlandfarming (UKRLAN). These two companies, controlled by Oleg Balhmatyuk, have earlier raised an aggregate USD 700 mln from Eurobond placements.

On top of that, this precedent adds more risk that another banking issuer, First Ukrainian International Bank (PUMBUZ), will also chose to restructure again. It is due to repay its earlier restructured USD 252 mln Eurobond in December 2014.

Источник: Конкорд Капитал