Metinvest withdraws bond restructuring offers, may offer new ones

Макроэкономика 06.05.2015 Ukraine’s largest steelmaker and iron ore miner Metinvest (METINV) decided to withdraw its proposal to the holders of its Eurobonds maturing on May 20, 2015, after a meeting scheduled for May 1 didn’t draw sufficient quorum. The holding’s proposal included a 10% outright cash payment for shifting the maturity to Jan. 31, 2016, and another maturity shift of the remaining outstanding amount was possible. At separate meetings, the holders of Metinvest’s 2017 and 2018 notes agreed to drop cross-default provisions but they didn’t take effect because they were conditional upon a positive outcome of the voting for the maturity shift of the 2015 notes. Metinvest stated it intends to send its bondholders new proposals “in due course”. Roman Topolyuk: As we assumed in our recent note on Metinvest, the 2015 bondholders did not support the proposed maturity extension. The good news is that Metinvest seems ready to improve the offer to the public holders of its shorter bonds, and a 20-25% outright payment combined with a more exact and extended amortization schedule would work for this exercise to follow through. We estimate that Metinvest has the ability to increase the outright payment to 25% of par (or to USD 29 mln, up from USD 11 mln), having around USD 170 mln in cash on its balance sheet as of end-March. However, we are keeping our negative view on METINV as PXF lenders holding 37% of total company’s debt have yet to decide on whether they are ready to contribute to the maturity shift. Another worrisome development is a build-up in Russian and pro-Russian military forces along the front line in the Donbas region close to Mariupol, where Metinvest’s two largest steelmakers are located. The worst case scenario of a Russian conquest of Mariupol implies severe risks for Metinvest’s solvency.