Mriya asks creditors to approve debt restructuring by end-March

Farming company Mriya (MRIYA) has requested its creditors to approve the restructuring of its debt by the end of March, the company announced on March 22.

Once approval is obtained, Mriya could negotiate raising an additional USD 50 mln in fresh debt in the form of a working capital facility “from a consortium of existing bondholders and international investors” by late April, according to the company’s press release. Mriya has already received an offer for such an amount from the consortium. These funds are required for the completion of the 2016 spring sowing campaign and for conducting the harvest season. The facility would be structured as a one-year PXF, having the option of an extension for another year.

The most recent restructuring terms, proposed for consideration by the coordinating committee of creditors, include reducing total debt to USD 300 mln from USD 1.15 bln, as of June 2015, the press release said. The total debt in the proposed amount should include, among other things, secured debt (which represented 15% of total debt, as of June 2015) and a working capital facility for 2016. Management proposes to convert the rest of the debt into equity.

Roman Topolyuk: The company announced already in December 2015 that it asked creditors to reduce debt to USD 300 mln (implying a haircut of 74%) from USD 1.15 bln. Inclusion of the fresh debt financing of USD 50 mln, yet to be raised, as part of this USD 300 mln targeted debt implies that management proposes an even higher haircut of 78% on its existing debt, which reflects the financial dire straits in which the company finds itself in.

Despite the bonds of MRIYA trading at lows of 8-10 cents per dollar, and the downside being limited, the potential from a possible debt-to-equity swap is at significant risk in the short- to mid-term. The company may continue to depend on injections from creditors in working capital. We abstain from rating Mriya’s bonds.