Metinvest affiliate Donetsksteel accused of unfair treatment of creditors

Donetsksteel, a member of Pokrovske Coal group of
assets – in which Metinvest (METINV) owns a 24.99% stake – has been accused in
court complaints of engaging in preferential treatment of some creditors at the
expense of others. A Kharkiv appellate court published rulings on Feb. 18
revealing that several complaints of similar content had been filed by the East
West United Bank S.A. of Luxembourg (EWUB), a Donetsksteel creditor with a loan
agreement of up to USD 500 mln. The bank alleges that several amicable
agreements between Donetsksteel and another creditor, Investment Capital
Ukraine (ICU), violated EWUB’s rights as a creditor. The amicable agreements,
approved by courts in September-October, foresee that Donetsksteel has a month
to pay ICU a total of about USD 79 mln. In its Feb. 18 rulings, the appellate
court said it will review the complaints in the first half of March.

Dmytro Khoroshun: We interpreted the amicable agreements between Donetsksteel and
ICU as a precedent that will eventually lead to Metinvest, the likely ultimate
owner of Pokrovske Coal assets in several years, having to repay about USD 1
bln of the assets’ debt. We continue to see this as the base case, and think
that EWUB’s complaints, although they might rightly underline preferential
treatment of some creditors (ICU), will not uncover Donetsksteel’s complete
unwillingness to pay its Western creditors. Instead, this might be a question
of prioritizing ICU payments on a timely basis, for example, due to the
upcoming elections.