PUMB offers to exchange its 2014 Eurobonds for cash, new notes

First Ukrainian International Bank (PUMBUZ, PUMB) released a consent solicitation memorandum on Nov. 10 to change the terms of its USD 252 mln in Eurobonds maturing on Dec. 31, 2014. The bank has offered an exchange of its notes for a mix of cash and new four-year amortizing notes. The cash consideration will amount to 15% of par for those sending in their consent by a Nov. 18 early deadline, and 10% for those sending consent by a second deadline on Nov. 24.



The new Eurobonds have an 11% coupon rate paid quarterly (the same as the old one), and would amortize in equal quarterly installments between Dec. 31, 2016 and Dec. 21, 2018. On top of that, PUMB seeks to receive consent from note holders to decrease a covenant on its Basel CAR floor to 10% from 15% (the ratio was 18.1% as of end-September 2014).



The bondholder meeting is scheduled for Nov. 27, with a meeting quorum of two-thirds of total notes outstanding and a three-fourths quorum among attendees for the approval of new conditions.



The bank also released its IFRS financials for 9M14, reporting UAH 212 mln loses for the period (vs. a UAH 410 mln profit in 9M13), mostly being attributed to UAH 2,139 mln in losses from loan loss provisioning (vs. UAH 340 mln a year before). The provisions increase was the result of impaired Crimean loans (provisioned by UAH 249 mln in 9M14), Donbas loan (UAH 813 mln) revaluations of distressed USD-denominated loans (UAH 285), and provisioning of other loans (UAH 792 mln).



According to the bank, its NPLs in Crimea increased to 50% as of end-September (from 9% at the year’s start), and to 17% in Donbas (from 12%). The bank highlighted on a possible need for more provisioning in the next quarters.



PUMB’s end-September cash position was UAH 2.4 bln (including cash held with the central bank), vs. UAH 1.9 bln at the year’s start. The bank estimates its end-2014 liquidity gap (if it will have to repay its Eurobond) at USD 215 mln. It expects to partially repay USD 37 mln of its Eurobond, which would be possible if the government repays to the bank USD 70 mln of local bonds that mature in 4Q14, according to the bank. The total amount of government’s local USD-denominated bonds held by PUMB as of end-September was USD 160 mln, maturing by May 2015.



Its liquidity ratio, under local standards, improved to 72% in the year’s start from 64% as of end-3Q14 (with the minimum requirement being 40%). Its CAR under local standards improved to 12.9% from 11.8% as of the year’s start. The bank reported that a stress test done by the central bank this summer indicated no need for an additional capital injection.



Alexander Paraschiy: At PUMBUZ’s current price of 69% of par (yielding about 350% to maturity), the offer (assuming the holders will agree to it by the early deadline) suggests an IRR of the deal close to 32%. The proposal, therefore, provides a better annualized return compared to investing in DTEKUA’18 and METINV’18, yielding 23%-24% to maturity.



The bank’s restructuring offer could have been more generous, as can be determined from a recent offer to restructure its 2015 notes made by the related holding, Metinvest. Recall, Metinvest’s currently valid offer is a 25% cash payment and new three-year amortizing notes. We note that Metinvest’s deal offers a smaller IRR compared to PUMB’s offer, based on the bonds’ current prices and coupon rates.



We believe PUMB’s position in cash, as well as the government’s local Eurobonds, enable it to propose something more generous to its bondholders in the near future, provided its offer fails to attract a quorum. As PUMB has scheduled a bondholder meeting for Nov. 27, it will have enough time to enhance its offer until the Eurobond matures.

Источник: Конкорд Капитал