Page 55 - UKRRptMar19

8.5 Fixed income
8.5.1 Fixed income - bond news
Ukraine’s largest pipe producer Interpipe intends to offer its international creditors a ten-year value-recovery instrument (VRI) linked to the greater of EBITDA and CFADS (cash available for debt service), Debtwire reported on February 26, as cited by Concorde Capital. The payouts would amount to 15% of CFADS or EBITDA in years 1-4, 20% in years 5-7, and 25% in years 8-10, Debtwire said, adding that Interpipe would retain an early settlement option. In addition, Debtwire reported that the restructuring fee would amount to $5.9mn, and that there would be additional lockup fees for several classes of creditors. Recall, February 20 was the deadline for Interpipe’s creditors to enter into lockup agreements in relation to the company’s latest restructuring proposal. Interpipe will be able to simply sign restructuring documents if it secures 100% creditor approval, Debtwire said. If not, the company will need to use an English scheme of arrangement. “We estimate that the VRI increases the value of Interpipe’s proposal by up to 7-8% of nominal. In detail, Reorg Research previously reported that the international creditors, with a total of $936mn in debt (including $199mn in Eurobonds), will be offered a six-year $310mn bond and a $45mn loan. Using the recently-hiked bond coupon rate of 10.25%, and discounting the bond flows at 15%, we arrive at an NPV of $295mn, or 31.5% of the nominal amount of international creditor debt, and this is without the VRI,” Dmytro Khoroshun of Concorde Capital said in a note. “Now, assuming as a reasonable better case yearly EBITDA of $120mn (the 2017 value reported previously by Reorg Research), and discounting the VRI flows to the creditors at 25%, we come to an NPV of $365mn, or 39.0% of nominal. Considering that Interpipe’s bond is currently quoted at 28.7/33.5, according to Bloomberg, Interpipe’s offer with such VRI parameters appears to offer up to 7-8pp in upside.”
55 UKRAINE Country Report March 2019 www.intellinews.com