Metinvest to exchange its 2015 notes with 77% of their holders

Ukraine’s largest steel and mining holding, Metinvest (METINV), gained the approval of its exchange offer for USD 500 mln in 2015 Eurobonds from 77% of its bondholders (the equivalent to USD 386 mln), the company announced on Nov. 25. Despite initially setting a 90% minimum threshold for the exchange to happen, the company decided to satisfy all of the requests received from bondholders, according to the announcement.



Those who agreed to the exchange will get for each USD 100 of their 2015 notes USD 25 in cash and USD 75 in new bonds maturing in November 2017, paying a 10.5% coupon twice a year. The notes will amortize in three equal semi-annual installments starting May 2016. For the purpose of the exchange, Metinvest will issue the new bonds for USD 289.7 mln. The new bonds have been already rated CCC by Fitch, on par with bonds maturing in 2015 and 2018. They will be guaranteed by the company’s operating subsidiaries.



Roman Topolyuk: The exchange offer’s approval is merely a partial victory for Metinvest. The participation rate of bondholders in the exchange offer only slightly improved, compared to 76% reached at the first deadline on Nov. 17. As a result of the offer, management has extended the maturity for USD 290 mln out of a total USD 500 mln of its 2015 Eurobonds, which doesn’t fully close the liquidity gap for the company next year, which we estimate to be twice as high, at USD 500 mln.



Therefore, Metinvest needs to reach a restructuring deal with its banking lenders (whom they have to repay totally USD 800 mln in 2015) and further reduce dividends (vs. USD 400 mln to be paid in 2014) to get through the next year without trouble.



Nevertheless, now the likelihood has increased significantly that the holding will smoothly repay its 2015 Eurobond, in the amount of USD 114 mln that will remain after the exchange is done. We consider this bond, currently yielding 52% to its maturity, to be the most attractive in the Ukrainian universe, based on its risk profile and expected return.

Источник: Конкорд Капитал