Metinvest may struggle to get support from 2015 bondholders

Обзор облигаций 22.05.2015 Ukraine’s largest steelmaker and iron ore miner, Metinvest (METINV), expectedly missed the USD 114 mln payment on its Eurobonds maturing on May 20, 2015, as the company is still trying to get bondholder approval for shifting the maturity of 75% of the notes to Jan. 31, 2016. However, Metinvest may struggle to get the necessary approval of its most recent restructuring plan of 2015 notes at the bondholders meeting scheduled for June 1, Debtwire reported on May 21. A group of bondholders, holding more than 25% of the 2015 notes, intends to oppose Metinvest’s amended consent solicitation, according to Debtwire. The amended offer, on the top of 25% outright repayment, includes an obligation to redeem the 2015 bonds proportionally with PXF debt, if PXF lenders get some repayment in excess of USD 28.4 mln. Moody’s commented on May 21 on Metinvest missing the principal payment, calling its credit negative and pointing out that cross-default provisions of 2015, 2017 and 2018 bonds and PXF debt are under the risk of being triggered. Metinvest owed USD 1,153 mln to bondholders totally and USD 1,203 mln to banks, as of end-2014. In separate news from Metinvest, the company reported that its largest coke producer Avdiyivka Coke (AVDK UK), located close to the frontline, was severely shelled on May 21. Equipment at the repair and railway transportation workshops was damaged, one employee was killed. Roman Topolyuk: The significant risks in financing and military-related operational threats support our negative view on the company’s Eurobonds. We don’t see Metinvest being able or determined to improve its offer to 2015 bondholders any further. From the other end, the risk of not obtaining the sufficient consent from the holders of 2015 notes is high, which means that a full-scale debt restructuring is at risk of being launched. Until the company reaches an agreement with public and banking lenders, and real peace is established in Donbas, we recommend abstaining from METINV bonds.