Metinvest interest rate on Pokrovske consideration possibly around 5%

Ukraine’s largest steel producer Metinvest (METINV)
might pay an interest rate of about 5.25% on the USD 190 mln consideration it
should pay for a 24.99% stake in Pokrovske Coal assets, the delo.ua news site
reported on Oct. 2. This follows from a Concorde Capital analysis of a charges
and mortgages document from Cypriot department of registrar of companies and
official receiver. The document shows that a company named Misandyco Holdings
Ltd., one of four Metinvest’s co-investors, having pledged its corporate rights
in Pokrovske Coal assets as a security for a USD 900 mln debt to Fintest
Trading Co. Ltd, the seller of the assets.

Recall, Metinvest reported in its 1H18 financial statements
that the USD 190 mln consideration for its 24.99% stake in Pokrovske Coal
assets is payable, with interest, within six years.

Dmytro Khoroshun: The 5.25%
interest rate is realistic for a debt secured by a corporate rights pledge. We
derived it assuming the USD 900 mln amount owed to Fintest includes USD 760 mln
of consideration for the corporate rights in Pokrovske Coal assets and USD 140
mln of total interest on this consideration over six years.

We highlight the risks of Metinvest having
eventually to pay not only the USD 900 mln in relation to corporate rights in
Pokrovske Coal assets, but also the debt of these assets to their creditors,
which we estimate amounts to around USD 1 bln.