Metinvest 2018 CapEx cap might rise by USD 100 mln

The 651 mln cap on the 2018 CapEx of Ukraine’s leading
steel holding Metinvest (METINV) might rise by USD 100 mln if certain
conditions are met in its 2017 restructuring agreement with bondholders, the
company indicated in its November presentation of its 9M17 results.

The 2018 CapEx limit might be increased “if all
interest payable during 2017 is paid in full and all capitalised interest is
repaid following the cash sweep payment on 18 November 2017,” according to
Metinvest’s presentation.

Dmytro Khoroshun: After
further review of the debt restructuring documentation, we are revising our previous position and we think
that the USD 100 mln increase of the 2018 CapEx is possible. The fine detail
that came to our attention is that Metinvest had to pay in cash the PIYC and
catch-up interest on May 18 and Aug. 18 not in the maximum amounts possible,
but only to the extent these amounts were payable. This, in turn, means that if
Metinvest had no money to distribute to creditors at these levels of cash sweep
at these dates, as was the case, then amounts payable were smaller than the
maximum amounts, even zero in some instances. Therefore, Metinvest did not
breach any conditions of the CapEx cap increase, which is clause 4(t)(i)(B)(2)
of the Terms and Conditions of the Notes.

Provided that global steel and iron ore prices
continue allowing Metinvest to generate high operating cash inflows, we think
the more cash Metinvest spends on CapEx or even on dividends, the more valuable its Eurobond is. This is
because the effective duration of Metinvest Eurobonds increases when the amount
of early redemptions decreases.