Ferrexpo postpones bond issue

Ferrexpo (FXPOLN) announced on Feb. 20 that it decided not to proceed with a USD-denominated bond issuance, citing widening credit spreads since early February, among other factors.

Roman Topolyuk: Ferrexpo had been very cautious and selective before its first Eurobond issue in April 2011, testing the market with multiple road shows. So we believe the company will return to the debt market once it senses the conditions are more appropriate. We estimate the proceeds of such an issuance may be used to construct a 10 mmt concentrator facility, a project costing more than USD 700 mln, which is still subject to board approval.

Yet the company blaming market conditions for the delay looks a bit strange, as they do not look any worse than in spring 2011 (at least, Ferrexpo’s 2011 bond is priced currently at premium to par). We note that this is the first postponement of a Eurobond issue announced by a Ukrainian company in 2013. It should serve as a clear worrying signal for the Ukrainian government, which is counting on Eurobond placements this year.