Metinvest affiliate Donetsksteel avoids trial over treatment of creditors

A court appeal against Donetsksteel – a member of the
Pokrovske Coal group of assets in which Metinvest (METINV) owns a 24.99% stake
– alleging unfair treatment of its creditors was closed on Mar. 27 according to
a decision published on Apr. 3.

A Kharkiv appellate court decided to close an appeal
by the East West United Bank S.A. of Luxembourg (EWUB) against an amicable
agreement between Donetsksteel and another creditor, Investment Capital Ukraine
(ICU). The bank alleged that the
agreement, approved by the first-tier court in September 2018, violated EWUB’s
rights as a creditor by prioritizing the payment to ICU.

However, the appellate court found that EWUB’s rights
were not a direct subject of the first-tier decision, and therefore EWUB has no
right to appeal. The appellate court also noted that Donetsksteel, as a free
enterprise not in a state of bankruptcy, has the right to prioritize payments
to its creditors as it pleases.

Dmytro Khoroshun: We continue to interpret 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.
Nevertheless, Metinvest noted during its Mar. 21 call with investors
that the management of Pokrovske Coal assets is working with the assets’ creditors
on the possible restructuring of their debt, and we cannot completely rule out
an eventual haircut.