Fitch downgrades Interpipe rating to restricted default

Fitch Ratings agency announced on November 8 it downgraded the long-term issuer default rating of Interpipe to RD (restricted default) from C, while leaving the rating of its 2017 USD 200 mln Eurobond unchanged at C. It cited the reason for the cut as Interpipe’s inability to make a scheduled principal payment of USD 106 mln on November 1, though the company continued to pay the interest. Interpipe initiated negotiations on restructuring debt repayments with lenders and it isn’t likely to complete them this year, according to Fitch. In addition, Fitch has downgraded its 2013 Interpipe EBITDAR (EBITDA, including restructuring or rent costs) forecast to USD 260-290 mln from USD 340-360 mln.

Roman Topolyuk: Interpipe’s inability to pay USD 106 mln of principal in November confirms the worsened liquidity position that the company faces. According to media reports, the company was able to repay USD 100 mln of its debt earlier this year. Next year, the company is scheduled to repay more than USD 300 mln of its debt, according to media, and most likely it will not be able to repay these debts as well. Most probably, Interpipe is now initiating a large-scale debt restructuring process (its gross debt stood at USD 1.044 bln as of end-2012), after its mid-term market outlook deteriorated significantly.

Specifically, Russia refused to extend special import quotas and effectively implemented 19% duties for Interpipe products since July 2013. Meanwhile, the U.S. has initiated an anti-dumping investigation against nine countries, including Ukraine, with a decision possible by the end of 2013.

We anticipate a consequent downgrade of Interpipe’s 2017 Eurobonds once Russia confirms it won’t reopen its market to the company and the U.S. implements anti-dumping duties against Ukraine.