Interpipe redeems its 2024 notes in full

Ukraine’s largest pipe and railway wheel producer
Interpipe (INTHOL) redeemed at par USD 6.5 mln of its 2024 notes on Jan. 26,
according to the company’s release on the same date.

As a result of this early redemption, Interpipe had
redeemed its 2024 notes in full.

Interpipe plans to focus on implementing its development
strategy after having repaid USD 400 mln in debt that resulted from its October
2019 restructuring, CFO Denis Morozov said in a company press release, as cited
by Interfax-Ukraine.

Dmytro Khoroshun: We do not
rule out Interpipe tapping the markets with a new Eurobond, which is consistent
with the company obtaining, as late as in November (by which time it had redeemed USD 228 mln
of its USD 309 mln notes), credit ratings from Fitch and S&P. Interpipe’s management mentioned,
in a September 2020 call with investors, the possibility of issuing a new
Eurobond tranche depending on market conditions.

Interpipe might use the money from a new Eurobond
placement in part for an early settlement of its performance securities
outstanding. An early settlement will require paying to the security holders
the higher of Interpipe’s previous year’s EBITDA and a minimum amount (USD 125
mln before 4Q23 and USD 175 mln after). We expect Interpipe’s EBITDA in 2021 to
be substantially lower than the USD 250-270 mln estimated for 2020. Therefore,
we think that the company might wait for 2022 with an early settlement of its
performance securities in order to minimize the payment.

As a result of the full redemption of its notes,
Interpipe should now start servicing its performance securities by paying fees
on its performance starting from July 1, 2021. Unless Interpipe settles the
securities early, the performance fee payments should last three years and
amount to the higher of 15% of EBITDA and 22.5% of adjusted cash flow (essentially
net operating cash flow before interest less self-funded CapEx).

Another result of the full redemption is that
Interpipe is now able to pay dividends to its owners.