Oschadbank has its Eurobonds restructuring approved

At their Aug. 3 meetings, bondholders approved restructuring of Eurobonds of Ukraine’s State Savings Bank (Oschadbank, OSCHAD). The approval rates were above 99% at the meetings where attendance rates were over 92%, the bank reported the same day.

Following the results of the meetings, Oschadbank will extend the maturity of its USD 700 mln notes (originally due on Mar. 10, 2016) by seven years, with repayment of 60% of principal with a three-year delay (Mar. 10, 2019). The rest will be repaid in eight semi-annual payments between Sept. 10, 2019 and Mar. 10, 2023. The coupon rate for the notes will be raised to 9.375% (from 8.250%).

Maturity of the bank’s USD 500 mln bonds (originally due on Mar. 20, 2018) will be also extended by seven years, with 50% of principal will be paid with a two-year delay (Mar. 20, 2020) and the rest will be repaid in ten semi-annual payments between Sept. 20, 2020 and Mar. 20, 2025. The coupon rate for the notes will be increased to 9.625% (from 8.825%).

According to the bank release, holders of USD 167.1 mln of the 2016 notes chose to exchange them into 2018 notes. The bank will satisfy their request during the restrcuring process. At the same time, the holders of USD 171.2 mln of the bank’s 2018 notes have asked to exchange them into 2016 notes. Such holders will only receive USD 167.1 mln in the shorter notes, on pro-rata basis.

According to the bank, the restructuring of Eurobonds will be completed after a respective approval by Ukraine’s central bank “in the coming weeks”. For its peer, Ukreximbank (EXIMUK) it took almost three weeks to complete the process.

Alexander Paraschiy: The approval of restructuring is an expected event, given that earlier Oschadbank reported its creditors’ committee accepted the offered conditions. At the current bond prices, yields to extended maturity of the bank’s 2016 and 2018 bonds (if they are exchanged into 2023 and 2025 notes, respectively) amounts to 14.9%, we estimate. The bond holders which applied to exchange their 2018 notes into shorter paper will earn YTM of 16.0%.

The holders of 2016 notes which, for some reasons, chose to exchange them into longer notes will earn YTM of 13.9%, we estimate. Before the exchange is completed, such notes should be traded with discount to other OSCHAD’16 Eurobonds, we believe.

In any case, the current implied returns on all the OSCHAD notes are higher than for Eurobonds of Ukreximbank which currently trade at YTMs of 12.6% to 13.0%.