Privatbank offers soft restructuring terms for its 2015 notes

Ukraine’s leading lender Privatbank (PRBANK) offered its bondholders to reschedule the USD 200 mln Eurobond maturing on Sept. 23 and USD 150 mln Eurobond maturing on Feb. 9, 2016, according to its June 26 press release. The bank has scheduled the bondholder meetings to vote for the proposal for July 13, offering holders a 2% consent fee to facilitate the rescheduling.

Privatbank offered to increase the coupon rate of its 2015 notes to 10% (up from 9.375%) and to repay it on Sept. 23, 2017 (30%) and Jan. 23, 2018 (70%).

For the 2016 subordinated notes, the bank offered an 11% coupon rate (up from 5.8%) and postponement of principal repayment by five years.

Alexander Paraschiy: The offered restructuring terms of Privatbank’s 2015 notes are better than what we modeled in our recent fixed income strategy (a 5Y extension with principal repayment in the last two semi-annual coupon periods and no consent fee). The bank has offered the shortest possible maturity extension for the notes to be able to offer a 2% consent fee under a new regulation of the central bank that requires at least a two-year extension.

The offered new repayment schedule of 2015 notes allows bondholders who agree on the restructuring to generate a 32.9% yield to extended maturity (at a bond price of 65 cents per dollar). This is much more attractive than the return of the Eurobonds of state Ukreximbank and Oschadbank, which are also in the process of restructuring (about 16 to 17% YTM). We believe such terms are attractive enough to enter the bank’s 2015 bond.

At the same time, we do not rule out that the bank will have to offer some more attractive terms for the 2015 notes after its July 13 bondholder meetings. At least, it has reserved room for the improved offer, e.g. to increase the coupon rate up to the allowed ceiling of 11% and reschedule the repayment of 70% of principal by a couple of months sooner.