Kernel announces 2022 Eurobond tender for up to USD 350 mln
6 October 2020
Ukrainian sunflower oil producer and grain trader
Kernel (KER PW, KERPW) announced on Oct. 5 a tender offer for its Eurobonds
maturing in January 2022. The maximum amount for buyback is USD 350 mln (out of
USD 500 mln outstanding), with an early consideration deadline of Oct. 19 and
expiration deadline of Nov. 2, the company said. The offering price for
the early tender is 105.625% of par and for the expiration deadline is
102.625%. The offer is subject to Kernel’s placement of new notes with longer
maturity, the company wrote.
In other company news, Fitch Ratings wrote that Kernel
plans to issue USD 300-350 mln in new Eurobonds with 5-7 year maturity. The
agency assigned a BB- (expected) rating for Kernel’s new issue (in line with
other bonds’ ratings). Fitch expects that the planned issue will reduce the
refinancing risk for the 2020 Eurobond. The agency expects that Kernel’s
revenue will increase to USD 4.7 bln to FY2023 (vs. USD 4.1 bln in FY2020) and
the profitability of its core oil segment will be about USD 60-75 per ton of
oil in FY2021-FY2023.
S&P Global Ratings raised the long-term issuer
default rating of Kernel to B+ (from B) with a Stable outlook. Also, the agency
assigned a B+ rating for Kernel’s planned Eurobond issue. The agency forecasted
weaker credit metrics in FY2021 with negative FOCF in the range of USD 45-55
mln, while it expects that Kernel will generate FOCF more than USD 100 mln in
FY2022.
The company’s B+ rating from S&P is one notch
higher than Ukraine sovereign and its BB- rating from Fitch is two notches
higher than Ukraine sovereign.
Andriy Perederey: Kernel’s
strong results in FY2020 (EBITDA rose 28% yoy) supports the process of Eurobond
refinancing. The company’s planned Eurobond issue will support its liquidity in
FY2021-FY2022 and facilitate its CapEx needs for FY2021 (about USD 270 mln).
Meanwhile, we agree with rating agencies that Kernel’s leverage won’t decrease
significantly in the near term.
We are maintaining our neutral view on KERPW bonds.
