Metinvest bondholder meeting approves extension of standstill

Ukraine’s largest iron ore miner and steelmaker Metinvest (METINV) announced on Jan. 27 the results of its bondholder meeting, held the same day, which considered the company’s proposal to extend the date of the standstill from end-January to May 27, 2016 and to reduce cash interest payments to 30% of the accrued amount (with capitalization of the accrued, but not paid interest). These and other proposals were prepared in a set, called a scheme of arrangement, which management said would give Metinvest and its creditors stable ground to negotiate new terms of its debt restructuring.

The bondholders, representing 92.49% of the bonds by value, approved the scheme. The next legal step is a U.K. court hearing scheduled for Jan. 29, which may sanction the scheme.

Previously, Metinvest disclosed in its explanatory statement to the scheme of arrangement that the it expects to repay its bonds in full once the restructuring process is agreed upon and implemented. Given the adverse scenario in which a bankruptcy is launched, Metinvest estimated the recovery value to its creditors of around 50%.

Roman Topolyuk: With the bondholders agreeing upon the scheme, we expect its banking creditors to follow suit and to agree to the standstill’s extension as well. Once that happens, Metinvest will be very close to getting relief on interest payments and securing a window of time to agree to the new terms of maturity. Generally, we don’t expect any group of creditors to accelerate payment in an environment in which the global steel and iron ore markets are in a through. But we won’t rule out such a risk until the standstill is finally agreed upon by both groups of creditors.