Metinvest affiliate Pokrovske Coal confirms taking on USD 0.5 bln debt

20 January 2021

PrJSC Pokrovske Coal took on USD 500 mln of debt as a result of PrJSC Donetsksteel restructuring its debt, a Pokrovske Coal representative confirmed to the Interfax-Ukraine news agency on Jan. 19.

 

The total amount of debt for which Pokrovske Coal was a guarantor exceeded USD 1.5 bln, but the company was able to negotiate taking on only a part of that debt, Interfax-Ukraine reported. It also agreed to extend its payments to Donetsksteel's creditors for several years.

 

Recall, at their Jan. 15 EGM Donetsksteel’s shareholders approved an updated version of a settlement deed with the company's creditors that amounts to USD 1.34 bln in total, including by reimbursing USD 500 mln to Pokrovske Coal, which will pay the creditors in turn.

 

Dmytro Khoroshun: This development was expected and is neutral for Metinvest. If Metinvest consolidates control over Pokrovske Coal (but not over Donetsksteel) in the near future, the holding will add USD 0.5 bln to its debt. In addition, Metinvest will pay USD 0.5-0.6 bln to consolidate control of 75.22% of the corporate rights to the so-called Pokrovske coal business, which includes Pokrovske Coal but not necessarily Donetsksteel.

 

Interfax-Ukraine cited its Pokrovske Coal source as mentioning the deal with Donetsksteel creditors, which involves a London Court of International Arbitration case, as having been finalized. However, more information, including on how Donetsksteel plans to earn money to pay its creditors, is needed to fully assess the deal’s effect on Metinvest.

 

We see it likely that Donetsksteel will continue depriving Pokrovske Coal of a significant share of profits by acting as an intermediary for enriching the coal mined by Pokrovske Coal. If so, by consolidating control over Pokrovske Coal, Metinvest will likely not gain any additional free cash flow at all until all of Donetsksteel’s debts are repaid.

 

We maintain our neutral view of METINV bonds.