S&P rates Interpipe B, outlook Stable

S&P announced on Nov. 12 it has assigned a B
issuer credit rating with a Stable outlook to Ukraine’s largest pipe and
railway wheel producer Interpipe (INTHOL).

Both the rating and the outlook are the same as
S&P’s assessment for Ukraine’s sovereign credit. Interpipe’s other
long-term credit rating is by Fitch, B/Stable,
which is in line with Ukraine’s sovereign, assigned on Nov. 11.

S&P views Interpipe as a small steel producer with
a leading position in the niche railway wheel market and small-scale pipe
operations, according to the agency’s Nov. 12 release. Interpipe’s credit
quality is constrained by a limited operating and financial track record,
S&P said.

Interpipe’s EBITDA will amount to around USD 200-220
mln in 2020 (down from USD 259 mln in 2019), USD 150-200 mln in 2021, and USD
150 mln as the annual “normalized” EBITDA through the cycle, according to
S&P.

S&P understands that Interpipe’s financial
objectives include gross debt of about USD 300-350 mln, a minimum cash level of
about USD 100 mln, and reported net debt to EBITDA of up to 2.0x, according to
the release. Under the agency’s base-case scenario, Interpipe will complete its
transformation to a new capital structure with gross debt of about USD 350 mln
in the coming 12-18 months, S&P said.

Dmytro Khoroshun: Interpipe’s transformation to a new capital structure might involve
settling early its performance securities outstanding. This will require paying
out the higher of the previous year’s EBITDA and a minimum amount (USD 125 mln
before 4Q23 and USD 175 mln after). To minimize this payment, Interpipe might
want to wait until 1H22 before taking on large new debt (such as by issuing new Eurobonds) and a performance securities settlement.
Meanwhile, in 2021, Interpipe might prepay early its USD 81 mln notes
outstanding, mostly from its operating cash inflows, and start paying
dividends.