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Concorde Capital Research: Metinvest conference call confirms Eurobond refinancing risk

October 12, 2017 - Cbonds


Ukraine’s leading steel holding Metinvest (METINV) is considering a return to debt markets already in early 2018, CEO Yuriy Ryzhenkov said in a conference call on Oct. 11. In particular, the holding will consider refinancing of existing debt (Eurobonds and PXF facility) aimed not only at lowering the cost of debt, but also at aligning the debt repayment schedule with its capital investment plans for the next 5-10 years. Refinancing is unlikely in 2017, but is possible from the beginning of 2018, Ryzhenkov commented.

Ryzhenkov also confirmed that Metinvest is anticipating receiving large dividends from Southern Iron Ore Plant (we estimate the holding is due to receive UAH 7.4 bln, or about USD 275 mln). These proceeds will increase the holding’s cash balance and will be accounted for in distributions to the debtholders via the cash sweep mechanism if it's applicable by that time. Southern Iron Ore Plant, in which Metinvest owns 45.9%, declared UAH 16.2 bln (around USD 600 mln) in dividends on Sept. 5, payable by Mar. 5, 2018.

Regarding the capital investment plans, the holding has initiated a review of its Technological Strategy 2030. The planned amounts of CapEx are USD 500 mln for 2017 and USD 700 mln for 2018.

Ryzhenkov also commented on the EU’s recent decision to impose anti-dumping duties on certain Ukraine-produced hot-rolled products. Before these trade sanctions, the holding planned to deliver to EU 0.86 mmt of hot-rolled products in 2017, of which three-quarters has already been sold. To mitigate the effect of these sanctions, the holding plans to diversify to other regions, switch to selling other products to the EU market, and will try to appeal against the sanctions during annual reviews. Furthermore, at the current prices, the holding is considering continuing to sell the hot-rolled products to key customers in the EU, even under the duty regime.

Dmytro Khoroshun: Metinvest’s business has been performing strongly, relative to the several recent years, as evidenced by its strong financial performance and return to long-term planning. We see it’s possible that the holding will return to the debt market in 2018 in order to make the most of this current period of strength.

As we highlighted in our Sept. 26 report on Metinvest, the holding’s ability to find liquidity from operations and from attracting new debt adds the risk that it will be able to fully repay its Eurobonds in 2018. A possible USD 275 mln inflow from Southern Iron Ore dividends only intensifies such risk. We remain neutral on METINV Eurobonds.
Emisor, número de la emisiónMetinvest, 10.5% 28nov2017, USD
Type of debt instrumentBonos internacionales
Redemption typeAmortising
Status de la emisiónReestructurada
Type of placementPública
Par, currency of issueUSD 1,053.83
End of placement25.11.2014
Initial issue price100
Yield at pricing10.5
Coupon frequency2 time(s) per year
Settlement date28.11.2014
Maturity date28.11.2017
Issue ManagersBookrunner: Exch/Restr.
Trading floorIrish S.E.
Emisor: Metinvest
Issuer profile:

Metinvest Group is a vertically integrated steel and mining group of companies, managing every link of the value chain, from mining and processing iron ore and coal to making and selling semi-fini... more

Outstanding issues:
1 issuesUSD1,197,232,100
Issuer rating:
Moody's Investors ServiceCaa1/PositiveLT- foreign currency29.08.2017
Moody's Investors Scale (Ukraine)23.03.2017
Fitch RatingsB/StableLT Int. Scale (foreign curr.)06.04.2017
Fitch RatingsB/StableLT Int. Scale (local curr.)06.04.2017
Fitch RatingsAA+(ukr)/StableNational Scale (Ukraine)06.04.2017
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