Metinvest distributes additional cash among creditors in August

Ukraine’s largest steelmaking company Metinvest (METINV) distributed an additional USD 4.7 mln in accrued interest in August among its creditors, including USD 3.4 mln to bondholders, the company announced on September 8. According to the terms of the standstill agreement, Metinvest paid the regular 30% of interest accrued in August, or USD 2.8 mln to bondholders.

A payment of an additional amount became possible after the average unrestricted cash amount on its balance sheet reached USD 184.7 mln, and therefore it exceeded the threshold of USD 180 mln. Metinvest capitalized the unpaid USD 3 mln of interest to bondholders, after which the principal outstanding of the company’s Eurobonds grew 0.2% m/m to USD 1,192 mln.

Roman Topolyuk: In August, Metinvest repaid 67% of interest accrued on its Eurobonds, compared to just 30%, which was being paid from January to July 2016. Such a development is in line with our expectations, though we projected it to occur somewhat earlier. Starting in April, Metinvest has been replenishing its working capital, and its strong operating cash flow (EBITDA between USD 119-203 mln in April-June) was absorbed by investments into working capital. Now this process seems to have come to an end. We estimate that Metinvest will be able to even further increase the portion of cash interest paid to creditors, given steel and iron ore prices remain at the current firm level. We reiterate our positive view on Metinvest Eurobonds, trading at 74-76 cents per dollar, which is a discount of twenty points to other Ukrainian industrial corporates (FXPOLN, MHPSA, RAILUA).