Metinvest to distribute USD 14.8 mln to noteholders on Feb. 18

Ukraine’s largest steelmaker Metinvest (METINV) reported
on Feb. 15 that for the quarter ending Feb. 18 it will pay the compulsory
cash-pay (2.793% p.a.) on its notes due 2021, amounting to USD 8.3 mln.

The holding is not obliged to pay any other amounts
under the cash sweep mechanism because the average cash balance of USD 156 mln
for the period from Nov. 1, 2017 to Jan. 31, 2018 was below the USD 180 mln
threshold. Therefore, Metinvest will not pay catch-up interest (1.5025%) and
will not redeem any principal.

However, the holding decided to voluntarily pay the
pay-if-you-can (PIYC, 6.5795%) interest for one month (Jan. 18 – Feb. 17),
amounting to USD 6.5 mln. Recall, Metinvest previously made similar monthly USD
6.5 mln PIYC interest payments for Nov. 18 – Dec. 17
and for Dec. 18 – Jan. 17.

The record date for both the cash pay and the PIYC
interest payments is Feb. 16. The principal amount of bond outstanding will
remain at USD 1.187 bln after the payment.

Dmytro Khoroshun: Absence of
return of capital to noteholders (redemption of principal) is positive because
the return on capital (interest payments) will be the highest possible in the
next quarter and will therefore result in the greatest possible value of the
note.

However, it is certainly negative for noteholders that
Metinvest was unable to keep its cash balances high enough to be able to pay
the catch-up interest. This is a loss that noteholders will never be
compensated for.

We are keeping our neutral view on METINV
Eurobonds.