Metinvest, Ukraine’s biggest steelmaker led by the nation’s richest man Rinat Akhmetov, reported on April 9 that it has defaulted on $113 million in debt obligations due in May after it couldn’t get all its creditors to agree to accept delays on part of its March and April payments as part of a maturity extension offer.
The decision comes as the company – a unit of Akhmetov’s System Capital Management holding – has suffered heavy losses caused by the global plunge in iron ore prices and the war in Donbas, Ukraine’s easternmost industrial region where most of its assets are based.
Net income plunged 59 percent to $159 million in 2014, Metinvest reported on April 8. Revenue fell 18 percent to $10.6 billion while adjusted earnings before interest taxes depreciation and amortization rose 14 percent to $2.7 billion.
“The bonds have been trading at a certain discount and the market expected the bond would not be redeemed timely,” said Roman Topolyuk, a metals and mining analyst at Concorde Capital investment bank in Kyiv.
The market is expecting other corporate eurobonds to look to restructure their external liabilities, added Timothy Ash, head of emerging markets research at Standard Bank.
Akhmetov’s energy holding, DTEK, in 2014 managed to restructure $526 million in debt for the years 2016-2017, according to Concorde Capital. The group is due to repay $598 of its debt this year, excluding revolving lines and letters of credit of $418 million.
Last year Mriya Agro Holding in western Ukraine defaulted on $534 million worth of liabilities in October .
Its creditors now control the huge farming enterprise.
Going forward, Metinvest has asked bondholders to agree to cross-default waivers in regards to its other debt maturing in 2015, 2017 and 2018.
According to Eavex Capital, the conditions of Metinvest’s offer are: coupons are to be paid on May 20, Nov. 20 and Jan. 31 in exchange for a $5 cash payment for every $1,000 of each bond’s nominal value.
Metinvest shareholders this year won’t receive dividends, the group said – $400 million was paid out in 2013.
The company also asked for waivers of default on 2017 and 2018 eurobonds in exchange for a $2.50 cash payment for every $1,000 of each bond’s nominal value, according to Investment Capital Ukraine.
With the decision to default, it has bought itself more time to negotiate a new payment schedule, Topolyuk said.
