Ferrexpo extends early exchange deadline for bond restructuring offer

Ukraine’s largest pellet exporter Ferrexpo (FXPO LN, FXPOLN) announced it shifted the deadline to Feb. 17 from Feb. 2 for bondholders’ early approval of its exchange offer for company Eurobonds, initiated on Jan. 19. No other conditions of the offer were amended, the company said. The offer includes an exchange of 20 percent of the old notes – maturing in April 2016 – for cash, and the rest for new bonds with a 2.5pp higher coupon rate, repayable in two equal installments in April 2018 and April 2019. According to the initial offer terms, 60% of bondholders should approve it, though removing the 60 percent threshold is at the company’s discretion.

Roman Topolyuk: The fact that the updated exchange offer from Ferrexpo offers no improved conditions for bondholders might mean that the company has received decent support so far. On the other hand, Ferrexpo’s ability to improve the offer (e.g. to increase the cash down payment) is rather limited, since out of USD 627 mln in cash, it has earmarked USD 160 mln for working capital purposes and it also has to reserve around USD 300 mln to repay bank loans maturing by March 2016.

In case the notes exchange is approved and executed, the debt redemption schedule will better match the expected net operating cash flow of Ferrexpo, and the company will be able to negotiate additional debt facilities with potential lenders.