London court approves a scheme meeting of Metinvest's bondholders

Ukraine’s largest iron ore miner and steelmaker Metinvest (METINV) anounced on Jan.14 that the High Court of Justice ordered that day that a scheme meeting of bondholders take place on Jan. 27 in order to consider and vote on an approval of the scheme arrangement proposed on Dec. 24.

As Metinvest previously outlined in a practice statement letter, the proposals include converting all outstanding notes into one single class. Metinvest also requested that the standstill, currently agreed upon by both bondholders and banks by until Jan. 31, will be extended until May 27, 2016, and that Metinvest will pay creditors only 30% of its scheduled interest and capitalize the rest.

In order to be approved, the company’s proposal needs to get 75% of the votes of bondholder representatives present at the meeting. 

Roman Topolyuk: As the examples of other Ukrainian corporates have shown, using the UK scheme enables implementing the suggested restructuring measures without substantial delay and numerous negotiating rounds with creditors. So there is a high probability that the current proposal could be put forth, we think. That means, there is very likely that interest payments on METINV bonds will be reduced and the USD 85 mln Eurobond maturing in late January will be postponed until at least late May.

Once effective, this will cause a significant relief in Metinvest’s liquidity position, which is hardly breaking even currently after prices for iron ore and steel products tanked in 2015. As we estimate that product markets are far from bottoming out, we reiterate our negative view on the company’s bonds.