English court allows meeting of Metinvest bondholders

The High Court of England and Wales ruled on June 8 to approve a request by the executives of Ukraine’s largest steelmaker Metinvest (METINV) to conduct a scheme meeting of creditors on June 28 to review the proposed terms of a debt moratorium extension until September 30, the holding reported in a release that day. It will subject to another possible extension until November, the release said. Should 75% of bondholders support the proposed terms, another court will have to sanction the extension before it takes effect. The additional time won will enable the company and its creditors to finalize formalities regarding the debt restructuring. Metinvest previously announced that a restructuring fee of 0.75% and an additional early bird fee of 0.75% will be eligible to those creditors supporting the restructuring.

The previous standstill agreement expired on May 27. A couple of days before the expiry date, Metinvest announced the key terms of the total debt restructuring that were agreed upon with the coordinating committees of bondholders and banks. The key terms foresee swapping three bond issues – maturing in 2016, 2017 and 2018 – into one issue maturing in 2021. The new issue will have a minimum annual coupon of 2.793% by end- December 2018, an additional coupon of 6.5795% paid (if there is enough cash on balance) or capitalized, and a “catch-up” or premium interest of 1.5025%, paid subject to available cash. The new coupon in 2019-2021 will be 10.875%, while amortization of principal will occur as a cash sweep.

Roman Topolyuk: Despite a time gap between the expiry of the previous moratorium in the end of May and the possible introduction of a new one in the end of June, Metinvest’s creditors seems to be supportive of the company and cooperating, not trying to accelerate the payments. The new terms apply flexibility to what Metinvest will have to pay out, depending on market conditions, and will have strong chances to be approved by a majority of its creditors. We affirm our positive view on Metinvest’s Eurobonds, though we admit that an ongoing correction in steel prices may put some short-term pressure on its bond prices.