Metinvest owner assets unfrozen in Cyprus

SCM, the majority owner of Ukraine’s largest
steelmaker Metinvest (METINV) and energy hilding DTEK (DTEKUA), reported on June
6 that its assets have been unfrozen by the district court of Nicosia,
reversing a December 2017 court ruling. The court
dispute is related to a USD 821 mln London Court of
International Arbitration (LCIA) Tribunal award –
in favor of Raga Establishment Limited and against SCM Financial Overseas, a
Cypriot member of the SCM group that controls 71.24% of Metinvest – stemming
from the 2013 purchase of 92% shares in Ukrtelecom (UTLM UK).

The court stated in its June 6 judgement
that the December 2017 Cypriot freezing order was obtained by Raga
inappropriately and unjustifiably, SCM said, adding that it will continue to
defend vigorously against Raga Establishment claims in Cyprus and other
jurisdictions.

Dmytro Khoroshun: We think
that this June 6 Cypriot court ruling does not mitigate substantially the risk
of SCM having to pay USD 821 mln to Raga, for which SCM will need to collect
money from its assets, including Metinvest. As we noted before, Metinvest
is ready to provide liquidity, including via dividends, to SCM if needed, and a
substantial cash outflow will be a negative for Metinvest’s credit.

However, spreading the outflows over several years
will substantially mitigate Metinvest’s risks, and it is possible that the June
6 unfreezing of SCM’s assets will help SCM in reaching favorable payment terms
with Raga.