Metinvest to push the 2015 note maturity

Ukraine’s largest  steel and iron ore mining holding Metinvest (METINV) has announced intentions to renegotiate the maturity period of its USD 114 mln Eurobond maturing on May 20, and approve a number of waivers (we assume, for cross-default) for its 2015, 2017 and 2018 notes. The just published consent solicitations include a number of points to be approved by noteholders by Apr. 29 and confirmed at bondholder meetings, scheduled for May 1. Metinvest suggests to repay timely only 10% of the remaining outstanding 2015 Eurobond on May 20, and to shift the maturity of the rest to Jan. 31, 2016. A consent premium of 0.25% is offered for the extension approval, and another 0.25% for the waiver.

Metinvest also suggests approving waivers for 2017 and 2018 Eurobonds that will prevent noteholders from accelerating payments on the debt. The company is offering a 0.25% premium for giving waiver consent for each Eurobond.

As one of the reasons for the step above, the holding stated that it was unable to fully pay its PXF debt as of Mar. 10. Metinvest is in continuing default on its USD 113 mln PXF debt, and will not be able to pay USD 549 mln in PXF by January 2016.

In a separate statement, the company released its selected financial items for full year 2014: its EBITDA grew 14% yoy to USD 2.7 bln against the 18% yoy decrease in revenue to USD 10.6 bln and a 59% yoy plunge in net profit to USD 159 mln. Metinvest held USD 114 mln in cash as of end-2014, but estimates it cash needs at around USD 300 mln for normal operations. Total debt stood at USD 3.2 bln, as of end-2014, down by 25% yoy.

Roman Topolyuk: It looks like Metinvest has failed to obtain restructuring consent from PXF creditors (around USD 800 mln due in 2015). Even if Metinvest shifts the USD 114 mln Eurobond to January 2016, it will not solve the looming default on the USD 700 mln PXF debt. Anyhow, the way events are unfolding is very negative for bonds, and cross-default waivers for 2017 and 2018 is not good news for bondholders, as it indicates the company is making some pre-emptive steps to protect itself from creditors. The plunging iron ore and steel prices are making the outlook for Metinvest’s debt profile even dimmer.