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Concorde Capital Research: Interpipe offers creditors about 60% nominal haircut, media report

August 03, 2018 | Cbonds

Ukraine’s largest pipe producer Interpipe (INPIP) pitched a restructuring proposal at a lender meeting in London on July 17, according to Reorg Research, a distressed debt information provider. Interpipe proposes to exchange USD 1.25 bln of debt and accumulated unpaid interest into three new debt instruments: a six-year USD 310 mln bond with a 9.35% coupon, a USD 45 mln loan for international creditors and a USD 45 mln loan for Ukrainian banks, Reorg Research reported. In addition, international creditors and bondholders will receive EBITDA-linked performance instruments, whereas Ukrainian banks will receive a slightly smaller haircut, according to Reorg Research. After such a restructuring, Interpipe’s leverage would amount to 3.3x using the 2017 EBITDA of USD 120 mln.

A substantial fee will be paid upon restructuring, according to Reorg Research. The restructuring plan has wide creditor support and may be implemented via a consent solicitation, Reorg Research said, citing its sources.

According to the latest official public Interpipe balance sheet (end of 2012), the company had USD 1,045 mln in debt, of which USD 199 mln was bonds and USD 846 mln was bank and other loans, Reorg Research emphasized, adding that the creditors are still awaiting the term sheet for the restructuring.

Dmytro Khoroshun: We estimate that about USD 110 mln in loans were domestic at the end of 2012, and that the nominal haircut would amount to 59% for domestic creditors and 62% for international creditors, including bondholders. We estimate that there is little upside for Interpipe’s currently outstanding bond from the 30/35 percent of par quotes (as seen on Bloomberg) to the NPV of the deal to bondholders (32-35% of par, assuming a 3% of nominal restructuring fee, 15% discount rate and no flows from the EBITDA-linked instrument). However, further details, especially on the EBITDA-linked value-recovery instrument, are needed in order to estimate the deal’s value to Interpipe’s bondholders.

So far, Ukrainian companies have not been successful with deals in which the creditors, including holders of publicly traded instruments, agree to substantial haircuts but the equity holders keep their stakes. If Interpipe pulls such a deal off, it would be a great success for the company.

Issue: Interpipe Limited, 10.250% 2aug2017, USD

StatusDefaultCountry of riskRedemption (offer)VolumeEmission Rating (M/S&P/F)
redemption defaultYesUkraine08/02/2017200,000,000 USDNR/-/Withdrawn

Company: Interpipe Limited

Full company nameInterpipe Limited
Country of riskUkraine
IndustryFerrous metals

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