Metinvest to pay USD 6.5 mln in Eurobond interest on Dec. 18

Ukraine’s leading
steel holding Metinvest (METINV) reported on Dec. 11 that it will allocate USD
9.7 mln in an early repayment amount on Dec. 18, of which the only disbursement
to the noteholders would be the USD 6.5 mln of Pay-If-You-Can (PIYC) interest
for the period of Nov. 18 – Dec. 17.

Dmytro Khoroshun: We see little difference between
Metinvest making this voluntary PIYC interest payment on Dec. 18, rather than
the next interest payment date of Feb. 18, 2018. The possible reason for the
holding making early payment is increasing its flexibility in reaching
end-of-quarter KPIs related to some of the conditions of the recent
restructuring.

However, in particular, we think that this repayment will not allow
Metinvest to increase its 2018 permitted CapEx level, USD 651 mln, by an
additional USD 100 mln, because on May 18 and Aug. 18 Metinvest did not conform
to some of the necessary conditions of permitted CapEx level increase. Namely,
on these two interest payment dates, the holding did not pay in full and in
cash the PIYC interest (instead capitalizing it partly by issuing PIK notes)
and did not pay any catch-up interest. We are keeping our neutral view on
METINV Eurobonds.