Ukraine’s leading steel holding Metinvest (METINV) is considering a return to
debt markets already in early 2018, CEO Yuriy Ryzhenkov said in a conference call on Oct.
11. In particular, the holding will consider refinancing of existing debt (Eurobonds and
PXF facility) aimed not only at lowering the cost of debt, but also at aligning the debt
repayment schedule with its capital investment plans for the next 5-10 years. Refinancing
is unlikely in 2017, but is possible from the beginning of 2018, Ryzhenkov
Ryzhenkov also confirmed that Metinvest is anticipating receiving large dividends
from Southern Iron Ore Plant (we estimate the holding is due to receive UAH 7.4 bln,
or about USD 275 mln). These proceeds will increase the holding’s cash balance and
will be accounted for in distributions to the debtholders via the cash sweep mechanism if
it's applicable by that time. Southern Iron Ore Plant, in which Metinvest owns 45.9%,
declared UAH 16.2 bln (around USD 600 mln) in dividends on Sept. 5, payable by Mar. 5,
Regarding the capital investment plans, the holding has initiated a review of its
Technological Strategy 2030. The planned amounts of CapEx are USD 500 mln for 2017 and
USD 700 mln for 2018.
Ryzhenkov also commented on the EU’s recent decision to impose anti-dumping
duties on certain Ukraine-produced hot-rolled products. Before these trade sanctions, the
holding planned to deliver to EU 0.86 mmt of hot-rolled products in 2017, of which
three-quarters has already been sold. To mitigate the effect of these sanctions, the
holding plans to diversify to other regions, switch to selling other products to the EU
market, and will try to appeal against the sanctions during annual reviews. Furthermore,
at the current prices, the holding is considering continuing to sell the hot-rolled
products to key customers in the EU, even under the duty regime.
Dmytro Khoroshun: Metinvest’s
business has been performing strongly, relative to the several recent years, as evidenced
by its strong financial performance and return to long-term planning. We see it’s
possible that the holding will return to the debt market in 2018 in order to make the
most of this current period of strength.
highlighted in our Sept. 26 report on Metinvest, the holding’s ability to find liquidity
from operations and from attracting new debt adds the risk that it will be able to fully
repay its Eurobonds in 2018. A possible USD 275 mln inflow from Southern Iron Ore
dividends only intensifies such risk. We remain neutral on METINV Eurobonds.
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