Page 54 - UKRRptNov20

notes will amortize by $300mn in January 2021 and then semi-annually by $37.5bn between July 2021 and January 2025. The bank’s 2022 notes should have been already amortized by 75% (from $750mn), with the remaining semi-annual $62.5mn amortization payments in April 2021 – April 2022. Therefore, in case the bank is able to purchase all the $300mn notes in November, it will reduce the bonds’ amortization amounts by $179mn in 2021, by $58mn in 2022, by $25mn in 2023-2024 and by $13mn in 2025. There is indeed little purpose for the bank to pay over 9% interest on its Eurobonds while its dollar deposit rates are below 2%. At the same time, we see few reasons for the holders of EXIMUK bonds to offer them to the issuer, with limited reinvesting alternatives at such yields.
Kernel​ places 7Y Eurobond at 6.75%, reports on early tender results. Ukraine’s leading farmer and vegetable oil producer Kernel (KERPW, KER PW) completed on October 20 the placement of its $300mn Eurobond maturing in October 2027. The placement rate was 6.75%, which is 105 bps below Ukraine’s sovereign curve.​ T​ he company also reported that the holders of $286mn of its Eurobond maturing in January 2022 have agreed to sell their notes as of the early tender deadline of October 19. Recall, the company announced on October 5 an offer to tender up to $350mn of the 2022 notes. The ultimate deadline of the tender is November 2.​ ​As ​we expected​, Kernel’s debt extension operation has proceeded successfully. Meanwhile, it looks like the company will be able to repurchase a lesser amount of its 2022 Eurobonds than had been planned. We are keeping our neutral view on KERPW.
Ukrainian sunflower oil producer and grain trader​ ​Kernel​ announced on October 5 a tender offer for its Eurobonds maturing in January 2022. ​The maximum amount for buyback is $350mn (out of $500mn outstanding), with an early consideration deadline of October 19 and expiration deadline of November 2, the company said. The offering price for the early tender is 105.625% of par and for the expiration deadline is 102.625%. The offer is subject to Kernel’s placement of new notes with longer maturity, the company wrote.​ ​In other company news, Fitch Ratings wrote that Kernel plans to issue $300-350mn in new Eurobonds with 5-7 year maturity. The agency assigned a BB- (expected) rating for Kernel’s new issue (in line with other bonds’ ratings). Fitch expects that the planned issue will reduce the refinancing risk for the 2020 Eurobond. The agency expects that Kernel’s revenue will increase to $4.7bn to FY2023 (vs. $4.1bn in FY2020) and the profitability of its core oil segment will be about $60-75 per ton of oil in FY2021-FY2023.​ ​S&P Global Ratings raised the long-term issuer default rating of Kernel to B+ (from B) with a Stable outlook. Also, the agency assigned a B+ rating for Kernel’s planned Eurobond issue. The agency forecasted weaker credit metrics in FY2021 with negative FOCF in the range of $45-55mn, while it expects that Kernel will generate FOCF more than $100mn in FY2022. The company’s B+ rating from S&P is one notch higher than Ukraine sovereign and its BB- rating from Fitch is two notches higher than Ukraine sovereign.
Ukraine’s Kernel Holding S.A., the world’s largest sunflower oil manufacturer and exporter, plans to start investor calls on October 7 to place $300-350mn in Eurobonds for terms or 5 or 7 years​, Bloomberg and Interfax-Ukraine report. In parallel, Kernel is buying back up to $350mn of its Eurobonds 2022. J.P. Morgan is the sole global coordinator and joint bookrunner and Crédit Agricole CIB and Natixis are joint bookrunners. Some of the new money is to go to retire debt and some to Kernel’s ambitious $270mn capital expenditure program for the fiscal year ending next June.
54​ UKRAINE Country Report​ November 2020 ​ ​www.intellinews.com