Metinvest announces tender for 2023 notes

Ukraine’s largest steelmaker Metinvest (METINV) on
June 17 launched a tender to purchase some of its 2023 notes outstanding,
according to its regulatory announcement.

 

Metinvest is inviting the holders of METINV’23 notes
to make their offers to the company to sell these notes. Metinvest’s reason for
this deal is to proactively manage its debt maturity profile, the announcement
stated.

 

Metinvest intends to purchase up to USD 150 mln in
principal amount of the notes, but may purchase more or less than this amount,
at its sole and absolute discretion, or not to purchase any notes.

 

The tender will take place via a modified Dutch
auction, with Metinvest’s minimum purchase price amounting to 107.3% of par. A
noteholder has an option to submit a competitive offer (specifying its offer
price and the volume it is willing to sell) or a non-competitive offer
(specifying only the volume). Metinvest will determine the purchase price, and
accept firstly all non-competitive offers, secondly competitive offers with
offer prices lower than the purchase price, and thirdly competitive offers with
offer price equal to the purchase price. Pro rata allocations will be applied
to the volumes at the first and the third acceptance steps. Metinvest will pay
the noteholders the interest accrued on their notes tendered in addition to the
purchase price.

 

The amount outstanding of METINV’23 notes is currently
USD 311 mln. On June 16, these notes were quoted at 106.8/107.8 percent of par,
according to Bloomberg.

 

The indicative expiration time for the invitation is
4pm London time on June 24, with the company having options to extend it or
terminate it early, according to Metinvest’s announcement. The indicative
results announcement date for the tender is expected to be June 25. The
indicative settlement date is on or about June 29.

 

Dmytro Khoroshun: It might
make sense for noteholders to offer as much as possible of their bonds to
Metinvest because the notes not purchased will become less liquid as a result
of the tender.

 

One reason for the expected decrease in liquidity is
the likely exclusion of these notes from JPMorgan CEMBI Broad Diversified index
because the amount outstanding would likely drop below USD 300 mln after the
tender.

 

We expect the total volume offered by the noteholders
to be close to the total amount outstanding, one reason being that Metinvest’s
minimum purchase price for this tender is close to the note’s all-time high
price of about 107.6% of par achieved in February. In such a case, it would be
up to Metinvest to decide where to draw the line pricewise, leaving noteholders
with the highest offer prices with less-liquid notes on their hands.

 

Given Metinvest’s currently-high profitability, the
company might be able to set the acceptance amount close to the total amount
outstanding, rejecting only competitive offers with the prices much above the
107.3% of par minimum purchase price.

 

We maintain our neutral view on METINV bonds.