February 15, 2018 | Cbonds
Ukraine’s largest steelmaker Metinvest (METINV) reported on Feb. 15 that for the quarter ending Feb. 18 it will pay the compulsory cash-pay (2.793% p.a.) on its notes due 2021, amounting to USD 8.3 mln.
The holding is not obliged to pay any other amounts under the cash sweep mechanism because the average cash balance of USD 156 mln for the period from Nov. 1, 2017 to Jan. 31, 2018 was below the USD 180 mln threshold. Therefore, Metinvest will not pay catch-up interest (1.5025%) and will not redeem any principal.
However, the holding decided to voluntarily pay the pay-if-you-can (PIYC, 6.5795%) interest for one month (Jan. 18 – Feb. 17), amounting to USD 6.5 mln. Recall, Metinvest previously made similar monthly USD 6.5 mln PIYC interest payments for Nov. 18 – Dec. 17 and for Dec. 18 – Jan. 17.
The record date for both the cash pay and the PIYC interest payments is Feb. 16. The principal amount of bond outstanding will remain at USD 1.187 bln after the payment.
Dmytro Khoroshun: Absence of return of capital to noteholders (redemption of principal) is positive because the return on capital (interest payments) will be the highest possible in the next quarter and will therefore result in the greatest possible value of the note.
However, it is certainly negative for noteholders that Metinvest was unable to keep its cash balances high enough to be able to pay the catch-up interest. This is a loss that noteholders will never be compensated for.
We are keeping our neutral view on METINV Eurobonds.
|Status||Country of risk||Redemption (offer)||Volume||Emission Rating (M/S&P/F)|
|Full company name||Metinvest B.V.|
|Country of risk||Ukraine|
|Country of registration||Netherlands|