Metinvest values assets far lower than debt outstanding

Ukraine’s largest iron ore miner and steelmaker Metinvest (METINV) estimated the net value of its assets at lower than USD 2.5 bln, Interfax-Ukraine reported on Jan. 19, referring to a company letter to bondholders. This sum is the amount of money the company needs to pay if it is declared insolvent during negotiations with its creditors and a bankruptcy procedure is initiated. The company stressed in its letter that even if the sales process is organized in a proper way, the net asset value of its assets would be considerably lower than USD 2.5 bln. Metinvest said its cash balance is USD 140 mln as of Jan. 6, 2016, while it stood at USD 150 mln as of Oct. 30, 2016. Metinvest also stated that if the agreement with bondholders is reached, it will be able to repay the bulk of its outstanding Eurobonds.

In an additional press release, Metinvest announced on Jan. 18 that it is intending to sign with banks an agreement that will subordinate the USD 386 mln shareholder loan in favor of PXF facilities. This agreement will be part of a discussed extension of a PXF standstill that expires on Jan. 31, 2016. Bondholders and banking lenders would share the benefits of a shareholder loan subordination on a pro rata basis. Recall, Metinvest scheduled a bondholders meeting for Jan. 27 to approve a new standstill for four months.

Roman Topolyuk: By publishing the estimate of its assets’ value, Metinvest is offering arguments to creditors to prefer supporting the debt restructuring instead of launching the bankruptcy procedure. With its total debt at USD 2.97 bln as of Sept. 2015 and a shareholder loan of USD 0.39 bln, the company’s net debt to external creditors is around USD 2.5 bln. Once the shareholder loan subordination is agreed and signed, creditors would get an additional argument is favor of approving the debt restructuring.