Metinvest prepares to launch large deal

16 March 2018

Metinvest (METINV), Ukraine’s largest steelmaker, is getting ready to launch a financing or refinancing deal potentially as large as USD 2.5 bln, according to our analysis of several Interfax-Ukraine reports. Toward this end, Metinvest is collecting shareholder approval for the top management of its assets to sign documents related to the future deals.

 

The holding has already obtained approvals from extraordinary general meetings held for Inhulets Iron Ore (March 14) and Central Iron Ore (March 15), which will be followed by Northern Iron Ore (March 16), Avdiyivka Coke and Azovstal (March 19), and Ilyich Steel (March 20), the reports said.

 

Dmytro Khoroshun: The value of Metinvest’s Eurobond is up for investors to lose or to realize. In case Metinvest offers to buy back its Eurobond, the markets should demand a price that reasonably reflects the full value of this unique instrument, which we think is above the recent highs of 106-107% of par.

 

As we speculated in our March 1 report, Metinvest’s ultimate motivation for the deal is to be able to pay dividends sooner than what is allowed under the current debt documentation. In turn, the steelmaker's desire might stem from the possible need of its majority owner, Ukraine’s SCM group, to be able to pay as much as USD 820.6 mln in a posisble award in relation to a legal dispute over SCM’s acquisitionof Ukrtelecom (UTLM UK).

 

The London Court of International Arbitrage will reportedly hold a hearing on this case on Apr. 23 that might trigger the need for SCM to collect from its assets, including Metinvest, the total sum for paying the award. Because of the potential urgency for Metinvest to be able to pay its dividends, the market's hand in reaching a reasonable Eurobond buyback price looks rather strong.

 

We maintain our Speculative Buy recommendation on the Metinvest Eurobond on expectations of a deal in the near future.