Metinvest agrees with creditors' committees on key restructuring terms

Ukraine’s largest steelmaker Metinvest (METINV) announced today the key terms of its debt restructuring agreed upon with the coordinating committees of noteholders and PXF lenders on May 24. According to the terms, the company’s three Eurobonds issues, maturing in 2016, 2017 and 2018, will be re-profiled into a single USD 1,125 mln note maturing on December 31, 2021 at par.

The new bond will have a coupon consisting of four parts: 1) minimum 2.793% p.a., paid in all circumstances; and three other parts, occurring via cash sweep, if unrestricted cash amounts exceed USD 180 mln; 2) an additional coupon of 6.5795% p.a.; 3) the interest capitalized previously; and 4) “catch-up” interest of 1.5025%. Hence, the total effective coupon, without the previously capitalized interest, could comprise 10.875% p.a., once cash amounts exceed USD 180 mln, versus the current weighted average coupon of 9.31% for three Eurobonds. Amortization of the notes’ principal will also occur, according to the cash sweep principle.　　　

Metinvest stated that a hearing at a London court is scheduled for June 8, where it will request permission for a scheme meeting with creditors. A restructuring fee of 0.75% will be payable to all creditors on the date of the restructuring, and an additional 0.75% early bird consent fee will be payable to creditors, granting consent before the date, which has yet to be announced.

Metinvest expects to finalize the restructuring by Sept. 30, 2016, subject to possible extension by November 30, 2016.

Roman Topolyuk: The terms that Metinvest has preliminarily agreed upon with its creditors are better than what we assumed for the valuation of the company’s Eurobonds, owing to the effectively increased coupon via the “catch-up” interest. The cash sweep principle ensures earlier amortization of debt for bondholders and provides flexibility for the company, should liquidity tighten. We affirm our positive stance on Metinvest’s bonds and we will review our target price, subject to an update soon.