MHP to pay bondholders 0.5% for slight covenant amendment

Ukraine’s largest poultry producer MHP (MHPSA) launched a consent solicitation with bondholders on Feb. 11, aiming to amend two covenants on its Eurobonds. First, to exclude the effect of foreign exchange losses from the calculation of MHP’s consolidated net profit. Second, to decrease the allowance of restricted payments from 50% to 40% of consolidated net profit.

Bondholders have to deliver their consent by Feb. 26, 2016, and thus they will be eligible for a consent payment of USD 5 per USD 1000 notional amount of bonds.

Roman Topolyuk: The price the company has offered to bondholders, aiming to induce them to approve the consent solicitation, is quite high, meaning that MHP is trying to get the deal done as soon as possible, and doesn’t want to get bogged down in protracted negotiations with bondholders.

The implications, once the consent solicitation is approved, are rather technical. What we know at this stage: the company has sufficient net operating cash flow to pay-out dividends or enter into JVs, but its nominal bottom line has been negative due to steep hryvnia devaluation (non-cash FX loss in 9M15 comprised USD 289 mln compared to USD 561 mln in 9M14), which formally puts some limits on cash use, which MHP now aims to remove.

As MHP has confirmed to us today, its dividend policy will likely remain unchanged: MHP aims to distribute up to 50% of net income in dividends.