Metinvest offers enhanced exchange conditions for 2015 Eurobond holders

Ukrainian steel maker Metinvest (METINV) announced on Nov. 4 that it has enhanced its exchange offer for its 2015 Eurobonds from its Oct. 21 proposal. The new conditions include increased upfront cash payments to 25% of par, from 20% before. The rest is exchanged for new notes with a coupon rate of 10.5% (+0.5pp compared to the 2015 notes) maturing on Nov. 24, 2017, as before. But instead of bullet repayment of the notes stipulated in the previous proposal, this time Metinvest is offering notes that will amortize in four equal semi-annual installments, starting from May 24, 2016. On top of that, the company agreed to put a USD 400 mln cap on payments to shareholders, including dividends, in 2015-16. Bondholders are asked to give their consent to the new conditions by Nov. 18, as before.



Roman Topolyuk: The fact that Metinvest has enhanced its offer conditions suggests the approval rate of the previous offer, as of the early deadline of Oct. 31, fell short of expectations. It also indicated the high importance for the holding to complete the exchange deal, which puts it in an inferior bargaining position compared to bondholders. We think the new offer might get the consent of some bondholders, but we doubt whether it will get a 90% approval rate, which was targeted by Metinvest previously.



The current price of METINV'15 Eurobond at 82% of par implies a YTM of 52% (if repaid on time), while the new restructuring offer suggests the deal’s IRR at 26%. If a critical mass of bondholders will accept the exchange offer, Metinvest will smoothly repay its bond in May 2015 to those who decline. Clearly, a lot of holders want to be in this category because they will win a much better return on their paper than the rest. For this reason, we believe a lot of holders will decline the offer, counting on either a smooth repayment of their paper in May 2015 or some better exchange offer from Metinvest.

Источник: Конкорд Капитал