Mriya agrees to key restructuring terms with creditors

Ukrainian farming company Mriya (MRIYA) announced on Sept. 12 it has reached agreement on the terms of its debt restructuring with its creditors, led off by its total sustainable debt being reduced to USD 0.33 bln from USD 1.1 bln currently.

 

Unsecured creditors will exercise control of the company relative to their pro rata holdings of debt, according to the terms reached with banking and bondholder coordinating committees (CoComs) representing the debt holders. 11% of the total claims of all unsecured creditors (including bondholders and banks) will be converted into a USD 93 mln loan maturing in June 2023 and having a reduced interest rate until 2018, from when the rate will be increased to 10%.

 

The rest of the unsecured claims (89%) will be converted into quasi-perpetual and subordinated debt, to be redeemed only after the USD 93 mln loan is repaid, presumably from an IPO, the sale of its business or free cash flow.

 

The largest portion of total sustainable debt after the restructuring (32-34% of total) will be roll-up notes of USD 105-112 mln, representing claims from working capital providers that funded the operations of the company after it defaulted in August 2014. Mriya estimated that total recovery to unsecured creditors could exceed 25-45% over four-seven years.

 

With regards to secured debt, the company stated that the amount of the debt covered with pledges, reinstated as so-called “covered portions” of secured debt, will not exceed USD 75 mln. The company has guided that legal implementation of restructuring may continue up to March 2017.

 

Roman Topolyuk: The fact alone that both banking and bondholder committees have agreed upon the key terms of restructuring is very important for Mriya to remain as a going concern. The successful finalization of the legal process with all its secured and unsecured creditors would be also crucial for that.

 

We think the company also needs two-three years to stabilize its operating and free cash flow, when fresh working capital could be needed.

 

We estimate the NPV of cash flows to bondholders at 30-35 cents per dollar given the discount rate of 20-25% in the best case, compared to the current quotations of Eurobonds of around 6-9 cents. We abstain from rating Mriya’s Eurobonds at this stage, only stating that the upside potential for their prices is becoming more tangible.