Page 75 - UKRRptMay19

● Ferrexport
Pellet output at Ukraine’s largest iron ore pellet exporter Ferrexpo declined by 11.3% month-on-month to 847 tonnes in March, which amounts to 27.3 tonnes per day, according to calculations of Kyiv-based brokerage Concorde Capital. In January-March, Ferrexpo’s pellet output amounted to 2.54mn tonnes (28.2 tonnes per day), a 1.8% year-on-year decrease. Concorde's Dmytro Khoroshun tentatively expects Ferrexpo’s 2019 production volume to be in line with the company’s guidance of 10.6mn tonnes (about 29.1 tonnes per day), flat y/y. "Nevertheless, we note the opportunity for Ferrexpo to boost its sales and production volumes in 2019 because of the Vale mine disaster in Brazil. Ferrexpo’s Eurobonds are to be redeemed in full on Apr. 8," he added in a research note.
Ukraine’s largest iron ore pellet exporter Ferrexpo has redeemed $173mn of its Eurobonds outstanding on April 8, according to the company's statement. Dmytro Khoroshun at Kyiv-based brokerage Concorde Capital wrote in a note on April 9 that this redemption leaves Ferrexpo without publicly traded debt. "It is a tantalising question now whether the company will tap the bond market again," he added. Ferrexpo sees at least two negative aspects in bond financing - the high interest rate and the refinancing risk related to bullet repayment - and prefers cheaper, amortising PXF loans instead, the expert added. For example, this recent redemption of Eurobonds that paid 10.375% per year in interest was likely financed by a drawdown of up to $205mn of pre- export facility (PXF) that pays 450 bps over Libor and amortises quarterly over three years. "And the very fact that Ferrexpo came out of its 2015 restructuring with partially amortizing Eurobonds (half in 2018 and half in 2019) is also likely indicative of the company’s aversion to bullet maturities of large amounts," Khoroshun added. Nevertheless, if the company dares to expand significantly its production capacity, it will have to seriously consider returning to the bond market for financing. Namely, Ferrexpo has the potential to boost its pelletizing capacity from 12mn tonnes to 20mn tonnes per year in increments of 2mn tonnes per year. Concorde estimates that an expansion of 2mn tonnes per year will come at a cost of $500mn ($150 per tonne of pelletising capacity, and $100 per tonne of ore beneficiation capacity), and it might be difficult to borrow that much via PXF loans. An alternative to issuing Eurobonds might be to finance such expansion steps involving a mix of own funds from operations and project loans guaranteed by export credit agencies in countries supplying the equipment.
9.2.12 Other sector corporate news
Horizon Capital has acquired a minority stake in Dobrobut, the Kyiv- based private healthcare provider. Financial terms weren’t announced for the investment which is from Horizon new $200mn Emerging Europe Growth Fund III. Dobrobut CEO Oleg Kalashnikov said the company plans to shortly open a 10,000 square meter facility in Kyiv that will offer surgery and heart and cancer care.
75 UKRAINE Country Report May 2019 www.intellinews.com