IMC subsidiary to issue UAH 200 mln in bonds to refinance other debt

Burat-Agro, a 100% subsidiary of Industrial Milk Company (IMC PW), decided on August 2 to issue local secured bonds in the amount of UAH 200 mln. The total proceeds from the bonds placement will be used to repay the company’s other debts.

Burat-Agro plans to issue UAH 120 mln in B-series bonds redeemable in December 2014 and UAH 80 mln in C-series bonds redeemable in December 2015. No coupon rate on the new bonds has been announced. The bonds will be secured by guarantees from Industrial Milk Company and Chernihiv Industrial Milk Company (a 100% subsidiary of IMC).

In June 2012, Burat-Agro issued A-series, two-year bonds at a total face value of UAH 200 mln and a coupon rate of 14%. As of March 31, 2013, total debt of Burat-Agro amounted to UAH 336 mln (USD 42 mln), or 51% of IMC’s consolidated debt.

Alexander Paraschiy: By issuing new bonds (and possibly repaying its A-series bond), IMC will shift repayment of its largest debt from June 2014 to December 2014 and December 2015. This looks logical for an agricultural company that tends to have its biggest need in working capital in the middle of the calendar year and tends to have a much better cash position closer to the year’s end. As repayment terms for the new bonds look reasonable now, we could see a theoretical demand for new paper from the holders of A-series bonds.