Ferrexpo’s USD 174 mln stuck as F&C Bank declared insolvent

18 September 2015

Ukraine’s central bank declared Finance & Credit bank insolvent on Sept. 17 after being in a troubled state for seven months. The insolvency was declared after the bank’s management failed to uphold an obligation to maintain its liquidity by selling the non-core assets of the main bank’s shareholder, Kostyantyn Zhevago, to meet all liquidity ratios, the central bank said in a statement. The central bank’s move indicates a small likelihood of any corporate deposits being returned from the bank.  


Ukraine’s largest pellet exporter Ferrexpo (FXPOLN, FXPO LN), 51% of which is owned by Zhevago, has been holding a significant chunk of cash at Finances & Credit bank, or USD 174 mln out of USD 280 mln as of Sept. 16, according to company data.


Roman Topolyuk: With total debt of around USD 1,023 mln currently, and a cash position of USD 108 mln (without the USD 174 mln deposit), Ferrexpo’s net debt has risen 56% to USD 1,017 mln from June 2015. Its LTM net debt-to-EBITDA has worsened to 2.9x from 1.9x without that cash. This will have a direct negative effect on Ferrexpo’s equity value.


Ferrexpo’s deposit with Finance & Credit bank was risk throughout the last year as the bank faced liquidity troubles. We are sure Ferrexpo’s management acknowledged the risk before, which was one of the reasons why the company has initiated refinancing talks with banks, after the maturity of its Eurobonds has been shifted from 2016 to 2018 and 2019. Ferrexpo owes USD 315 mln in PXF debt and ECA to be repaid in 2H15 and 2016. Once the maturity of the banking debt is extended to future periods, the immediate liquidity threat will be mitigated.

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