Mriya may gain investor who buys new bonds at 0.6 of par

The Saudi Agricultural & Livestock Investment Co.
(SALIC) is close to purchasing Mriya Farming, a company with vast agricultural
assets in Ukraine, according to various reports in the international media. In
turn, Mriya Farming confirmed on Sept. 12 that a deal is in the works in which
SALIC will purchase the new bonds of Mriya Farming at a net price of 53-62% of
par (after a deduction of USD 10-15 mln in transaction costs). The deal may be
completed by end-October.

Recall, as part of Mriya’s USD 1.1 bln debt
restructuring in August, the holders of old Mriya Eurobonds (MRIYA) received
new bonds of a par value of USD 11.8 per USD 100 of old bonds, as well as some
other securities (shares and recovery certificates). On Aug. 6, some of the new
securities were sold at an auction, implying a 4% cash recovery rate of
the old bonds.

Mriya Agro Holding announced in August 2014 it
defaulted on some of its debt obligations, as well as declared it had off-balance
debt. Later on, the company was taken over by creditors who had been
restructuring the company’s debt since then.

Alexander Paraschiy: If the deal
is completed and SALIC buys out all the creditors’ new securities at the
declared price, the recovery rate of old Mriya Eurobonds will reach 6.3%-7.3%,
which is a substantial increase compared to the rate implied by last week’s
auction. By buying out all the unsecured debt of Mriya Farming, SALIC should
spend gross up to USD 144 mln in cash to purchase 100% in the company that will
have USD 102 in debt, implying total EV of the deal of up to USD 246 mln, or
USD 1,640 per hectare of Mriya’s land in cultivation. That pricing looks too
expensive for the company, which plans to generate EBITDA of USD 15 mln in the
current financial year.

Nevertheless, the deal is a positive development
for Mriya creditors, primarily because their four-year restructuring saga is
nearing to end. The weak debt recovery parameters of Mriya’s old debt still
look like a scarecrow for the creditors of Ukrlandfarming (UKRLAN), another
Ukrainian farming holding in default.