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Concorde Capital Research: Interpipe to offer creditors large restructuring fees, media report

April 09, 2019 | Cbonds

Ukraine’s largest pipe producer Interpipe (INPIP) secured 100% lender consent for a restructuring proposal and plans to finish the restructuring by June 30, according to Reorg Research, a distressed debt information provider.

In addition to details previously reported by Reorg Research and by Debtwire, in its Apr. 8 report Reorg Research said, citing its sources, that the fees to be paid on the restructuring will be large, consisting of the interest accumulated starting February 2018 for bondholders and starting November 2017 for other creditors at LIBOR+8%.

Reorg Research also said that the threshold for a share pledge enforcement was recently lowered to 66.6% from 75%.

Out of the total USD 1.297 bln of debt, working-capital creditors holding USD 125 mln of claims will receive a USD 45 mln loan. Other creditors, including bondholders, with a total of USD 1.17 bln of claims, will receive a new six-year USD 310 mln bond with a 10.25% coupon, a USD 45 mln loan paying 6.65% interest, and a value-recovery instrument (VRI) linked to Interpipe’s EBITDA, Reorg Research said. Interpipe will have an option to settle the VRI at a minimum of 100% of its annual EBITDA and USD 125 mln (within the first three years), or USD 175 mln (afterwards).

Dmytro Khoroshun: We calculate that the holders of the USD 200 mln Eurobond stand to receive USD 30 mln in fees outright upon restructuring, which increases the NPV to 58% of the nominal from about 39% we had estimated assuming much smaller fees. This estimate discounts flows from the new bond at a 15% rate and the VRI flows at a 25% rate.

If Interpipe’s shares are to be pledged as security against some event such as a default, the risks to the holders of the new debt will be lower and the NPV will be higher.

It appears that although Interpipe’s owners will not lose any shares in Interpipe right away, they had to pledge a stake in the company (details yet unknown) and lure the creditors into agreeing to haircuts with large fees (likely partially financed by a funds injection from the owner), which makes the deal more balanced.

Issue: Interpipe Limited, 10.250% 2aug2017, USD

StatusDefaultCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
redemption defaultYesUkraine08/02/2017200,000,000 USD-/NR/Withdrawn

Company: Interpipe Limited

Full company nameInterpipe Limited
Country of riskUkraine
IndustryFerrous metals

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