Metinvest affiliate Pokrovske agrees to pay USD 73 mln debt in full

The companies comprising Pokrovske Coal assets – in
which Metinvest (METINV), Ukraine’s largest steelmaker, owns 24.99% – agreed to
pay in full part of their debt owed to Investment Capital Ukraine (ICU),
according to two court decisions published on Sept. 27. In detail, the Donetsk
regional commercial court approved on Sept. 19 four amicable settlements
amounting to USD 43 mln, USD 26 mln, USD 3 mln and USD 1 mln (a total of USD 73
mln) involving CJSC Donetsksteel and OJSC Pokrovske Coal as debtors and ICU as
creditor.

Recall, in August Metinvest reported acquiring 24.99% in the Pokrovske Coal
group of assets, including OJSC Pokrovske Coal and CJSC Donetsksteel, for USD
190 mln. The remaining 75.01% stake in Pokrovske Coal assets was simultaneously
acquired by Metinvest’s co-investors that are likely companies affiliated with
Metinvest’s owners, the SCM and SMART groups. In its 1H18 financial statements
disclosed in September, Metinvest reported that it has an option to acquire the 75.01% stake in Pokrovske
Coal assets from its co-investors, and that the
payments for corporate rights in Pokrovske Coal assets might be spread over six
years. We estimate that the Pokrovske Coal assets have about USD
1 bln of debt on their balance sheet.

Dmytro Khoroshun: This development increases the probability of Metinvest having
eventually to pay not only the entire USD 760 mln for corporate rights in the
Pokrovske Coal assets, but also these assets’ debt in full, another USD 1 bln.
These payments, if spread over six years, will amount to around USD 300 mln
p.a., which is a bearable, but still significant, amount for Metinvest, whose 1H18 EBITDA amounted to USD 1.34 bln, or about USD 220 mln per month.