Privatbank gets closer to restructuring its USD 150 mln notes

Ukraine’s dominant commercial bank Privatbank (PRBANK) got approval from a London court to convene a scheme meeting on Nov. 11 aimed at approving the restructuring of its USD 150 mln subordinated Eurobond, DebtWire reported on Oct. 23. The court reportedly agreed to merge the USD 70 mln shareholder loan and its USD 150 mln in Eurobonds for the purpose of voting to approve the scheme, with a 75% required approval rate. Recall, as earlier reported by DebtWire, the bank is asking the holders of its subordinated Eurobond to extend its maturity by five years, to February 2021, as well as increase the bond’s coupon rate to 11% (from 5.8%). It also offers a 2% early consent fee to those having approved the restructuring by the Nov. 9 deadline.

The first attempt to approve such a 5Y extension failed on July 13. After that, the bank got approved the restructuring of another Eurobond, USD 200 mln maturing in Sept. 2015. The ultimate maturity of this bond (either Jan. 15, 2015 or Jan. 15, 2018) is conditional on the successful restructuring of the subordinated USD 150 mln bond.

DebtWire also revealed some of Privatbank’s capital increase plans, which are based on injecting UAH 600 mln in 2016, and UAH 1 bln in 2017 and 2018. Such capital injections will cover the amortization of the subordinated debt in future periods, according to the DebtWire report.

Alexander Paraschiy: To pass the 75% threshold of restructuring approval, Privatbank now needs only the votes of 63.3% of the holders of USD 150 mln notes. Most likely, such a scheme was initiated by the bank to bypass the resistance of some holdouts, which might have accumulated more than 25% of USD 150 mln notes outstanding. We are surprised with the UK court’s approval of such a scheme, and have to admit that the bank’s chances to get the restructuring approved have improved. If the deal is approved, the bank will have succeeded in avoiding repaying USD 350 mln in Eurobonds in January and February of 2016, thus improving its liquidity.

The bank’s recent capital increase of UAH 2.16 bln in June 2015, combined with USD 220 mln in new subordinated debt (if the bond restructuring is approved on Nov. 11), might enable the bank to increase its regulatory capital by up to UAH 7.2 bln. This amount is smaller than UAH 8 bln in total capital injection needs, which, according to Privatbank’s CEO, the central bank has estimated as a result of stress testing. We also note that the central bank hasn’t yet reported officially that it has completed its stress tests.