Interpipe offers creditors about 60% nominal haircut, media report

Ukraine’s largest pipe producer Interpipe (INPIP) pitched
a restructuring proposal at a lender meeting in London on July 17, according to
Reorg Research, a distressed debt information provider. Interpipe proposes to
exchange USD 1.25 bln of debt and accumulated unpaid interest into three new
debt instruments: a six-year USD 310 mln bond with a 9.35% coupon, a USD 45 mln
loan for international creditors and a USD 45 mln loan for Ukrainian banks,
Reorg Research reported. In addition, international creditors and bondholders
will receive EBITDA-linked performance instruments, whereas Ukrainian banks
will receive a slightly smaller haircut, according to Reorg Research. After
such a restructuring, Interpipe’s leverage would amount to 3.3x using the 2017
EBITDA of USD 120 mln.

A substantial fee will be paid upon restructuring,
according to Reorg Research. The restructuring plan has wide creditor support
and may be implemented via a consent solicitation, Reorg Research said, citing
its sources.

According to the latest official public Interpipe balance
sheet (end of 2012), the company had USD 1,045 mln in debt, of which USD 199
mln was bonds and USD 846 mln was bank and other loans, Reorg Research
emphasized, adding that the creditors are still awaiting the term sheet for the
restructuring.

Dmytro Khoroshun: We estimate
that about USD 110 mln in loans were domestic at the end of 2012, and that the
nominal haircut would amount to 59% for domestic creditors and 62% for
international creditors, including bondholders. We estimate that there is little
upside for Interpipe’s currently outstanding bond from the 30/35 percent of par
quotes (as seen on Bloomberg) to the NPV of the deal to bondholders (32-35% of
par, assuming a 3% of nominal restructuring fee, 15% discount rate and no flows
from the EBITDA-linked instrument). However, further details, especially on the
EBITDA-linked value-recovery instrument, are needed in order to estimate the
deal’s value to Interpipe’s bondholders.

So far, Ukrainian companies have not been successful
with deals in which the creditors, including holders of publicly traded
instruments, agree to substantial haircuts but the equity holders keep their
stakes. If Interpipe pulls such a deal off, it would be a great success for the
company.