IFC may issue a USD 250 mln loan to MHP

The International Finance Corporation (IFC) may issue a USD 250 mln loan to Ukrainian poultry producer MHP (MHPSA, MHPC LI), Interfax reported on April 22. The purpose of raising debt is to refinance the company’s Eurobonds which mature in 2015, as well as to fund the company’s new production facility in the Vinnitsa region.

Roman Topolyuk: Given the current limited room for MHP to raise new debt for CapEx purposes (net debt to EBITDA stood at 2.9x, as of end 2013, versus a Eurobond covenant of 3.0x), we estimate that the readiness of the IFC to lend MHP USD 250 mln will serve as back-up financing for the redemption of MHP’s 2015 Eurobonds, which have the principal of USD 234 mln left and are maturing in late April, 2015. This makes the 2015 paper, currently yielding at about 15%, a safer investment.

The ramp up of the Vinnitsa complex in 2014 will bring it to full capacity by the year’s end. This will presumably allow for better results of grain segment and limited CapEx needs of USD 100-120 mln this year (vs. USD 264 mln in 2013). We estimate that the company will then be able to improve its debt ratios by the year’s end, (to 2.5-2.6x net debt to EBITDA).