PUMB upgrades restructuring terms for its 2014 Eurobonds

Обзор облигаций 21.11.2014 First Ukrainian International Bank (PUMB, PUMBUZ) announced a new consent solicitation offer for the holders of its USD 252 mln Eurobonds maturing on Dec. 31, 2014. The new offer, dated Nov. 19, contains stricter covenants, a bigger down payment and a faster amortization schedule of the bonds to be restructured, as compared to the first offer released on Nov. 10. In particular, the bank offers to pay an upfront total cash consideration of USD 45 mln (18% of the notes’ total value, up from USD 37 mln before). The USD 45 mln down payment will be equally distributed among those holders of the existing notes who agree to the restructuring before a Dec. 1 deadline. The bank offers to postpone the maturity of the remaining notes by four years (as in the first offer) with the following amortization schedule: by USD 10 mln (or about 4% of the notes that will remain outstanding after the restructuring) on Dec. 31, 2015 and then in ten equal quarterly installments between Sept. 31, 2016 and Dec. 31, 2018. In the new filing, the bank also offers a stricter minimum CAR covenant (12.5%, compared to 10.0% in the first offer and 15.0% stipulated by the covenants of its 2014 Eurobonds). PUMB plans to convene a bondholder meeting to consider the offer on Dec. 4. Its quorum requires the holders of two-thirds of total notes outstanding. A three-fourths quorum among those attending will be needed to approve the new conditions. If approved at the meeting, the new conditions will be binding for all bond holders. Alexander Paraschiy: An offer of better conditions for note holders to make them approve the deal is what we earlier expected. This time, we see a much higher likelihood that the offer will accepted, as PUMB not only increased the amount of its cash down payment in its new offer, but also changed a rule of its distribution. While under the first offer, a bondholder was eligible to receive no more than 15% in upfront cash, now a bondholder who accepts the offer before the deadline will be eligible to get much more: 18% to 35% (and theoretically up to 100%) in cash. The fewer holders that accept the offer by the early deadline, the bigger percentage of cash will be distributed to each holder who meets the deadline. If the deal is approved at the Dec. 4 meeting, those filing their consent by the Dec. 1 deadline will enjoy an IRR of the deal of at least 42% (and up to 56%), based on the current price of existing PUMB notes at 69% of par. This looks like a bargain deal as it offers a higher return than 24%-27% YTM offered by 2018 Eurobonds of PUMB’s related holdings, DTEK and Metinvest.