Metinvest offers noteholders up to 105.25% in refinancing and restructuring deal

Metinvest (METINV), Ukraine’s largest steelmaker,
announced on March 19 a cash tender offer to purchase the METINV’21 Eurobond
and its intention to issue new Eurobonds, simultaneously asking noteholders to
consent to the restructuring of the METINV’21 Eurobond.

 

Refinancing: Metinvest has invited the holders of its
METINV’21 Eurobond to tender their notes for purchase for a cash consideration
of 100.5% of par by the final deadline of Apr. 19. The holders who meet the
early tender deadline of Apr. 3 in contacting the tender and information agent
will receive an additional early tender payment of 3.75% of par.

 

Restructuring: Additionally, Metinvest is seeking
consent of 75% or more of noteholders for a substantial amendment and
restatement of the conditions of the currently outstanding METINV’21 Eurobond
to align them with the conditions of the new Eurobonds. This will include the
removal of the cash sweep mechanism. The noteholders are also asked to consent
to the release of certain guarantors and the common security, as well as to the
issue of the new Eurobonds. The consent deadline is Apr. 3, and the consent fee
is 1% of par.

 

The portion of the METINV’21 Eurobond not tendered in
will become a vanilla, bullet-redemption note with a coupon rate in line with
the rate achieved for the new Eurobonds.

 

The pricing of the new Eurobonds and the announcement
of consent solicitation results are expected on Apr. 4, and the rate of
interest on the METINV’21 Eurobond will be revealed soon thereafter. The
announcement of the results is expected on Apr. 20, and the settlement date for
the deal is expected to be Apr. 23.

 

Metinvest intends to pay only the cash pay and
pay-if-you-can (PIYC) parts of the coupon, the total of 9.3725%, from Feb. 18
(the cash pay part) and March 18 (PIYC) until the settlement date.

 

Following Metinvest’s announcement, S&P Global
Ratings revealed on March 19 that it has assigned its B- issue rating to
Metinvest’s new Eurobonds. Fitch revised Metinvest’s outlook to Positive on
March 19 in anticipation of a successful completion of the deal and confirmed
its long-term issuer default rating for Metinvest at B.

 

Dmytro Khoroshun: This
initial offer by Metinvest allows for the noteholders achieving the total of
105.25% of par by tendering in the METINV’21 Eurobond and consenting to the
restructuring, all by Apr. 3. This is close to the lower bound of the
104.9-109.1% fair value range we arrived at in our March 1 report. We see the
potential for Metinvest being receptive to
discussing the entire fair value range, and therefore we think that the market
should respond with a counteroffer demanding a higher price.

 

In the past, Metinvest was open to making a second
offer during a liability management deal. Namely, in late 2014, Metinvest
increased the cash consideration of an exchange offer for its METINV’15
Eurobond to 25% from 20%, enhancing the value it offered to the noteholders.

 

We will discuss this deal in further detail in an
upcoming note.