Mriya CEO estimates USD 300 mln sustainable debt load

The sustainable debt level of farming company Mriya (MRIYA), which it might be able to service is USD 300 mln, CEO Simon Chernyavsky stated on Dec. 10. The bulk of its total USD 1.15 bln debt load will be swapped into equity, according to the CEO’s comments, regarding of what the conditions of the future restructuring might be. The company is currently at the final stage of restructuring talks with its creditors and might finalize them by the end of 2015, he said.

Roman Topolyuk: The comments from the CEO imply that USD 850 mln (74%) in Mriya’s total debt might be switched into equity. We estimate the fair value of Mriya’s total debt at about USD 273 mln, or 24% of its total par value. Taking into account that bonds trade at 10-16 cents per dollar of paer value, we see an upside of above 50% for Mriya bonds.

We derive the fair value of the debt based on the following assumptions: USD 850 mln in total debt will be exchanged into equity, Mriya’s free cash flow will be in line with management projections (negative of USD 21 mln in 2016, zero in 2017, and growing from USD 56 mln to USD 62 mln in 2021), and the discount rate for any cash flow is 15%. We also assume the company will start paying interest on its remaining debt as of 2018 at a 10% rate.

Should the above-mentioned assumptions be met, the company will be able to repay its USD 300 mln debt by the end of 2025. The NPV of its debt repayment flow would be USD 203 mln. As of end of 2021, its debt will be close to USD 197 mln. Assuming its 2021 EBITDA will be USD 72 mln (as the company projected), and assuming an EV/EBITDA ratio of 5x in 2021, Mriya’s equity value would be USD 163 mln in 2021. The NPV of this equity value would be USD 70 mln. This adds up to USD 273 mln.