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Art Capital Research: Agroton offered a bond buyback at 70% haircut

October 29, 2015 | Cbonds

Agroton made an offer to its 2019 note holders to buyback notes for 30 cents on a dollar plus accrued interest. The company is ready to buy up to $15 mln in nominal amount of bonds, while the total amount outstanding of the notes is $27.9 mln after the $22.1 mln buyback in April 2014. If the amount of offered notes exceeds $15 mln, the notes will be accepted for the buyback on a pro rata basis. The tender offer expires on November 4, 2015.

Art Capital view:

The news is POSITIVE for Agroton bond holders since the buyback offer price likely exceeds the current prices available in the market: around 20 bid in a very thin market. Agroton can spend up to $4.5 mln in the buyback program. As of June 30, 2015, its CEO and majority shareholder Iurii Zhuravlov had unsettled financial accounts with the company. The net debt position of the CEO to Agroton amounted to $26.8mn. At the same time, the company had a total of $17.7mn of other accounts payable related to the CEO, which makes the net position counting the loans and payables equal to $9mn. We believe that the proposed offer could be funded by this debt as well as by the $6 mln the company had in its bank accounts as of end-1H15. As for Agroton’s remaining assets and operations, we very much doubt that the company would be able to continue as a going concern since it suffered a major setback in 2014 after the separatists took control of a significant portion of Luhansk region, which was home to most of the company’s assets. That said, we believe that there is little reason why bondholders should wait for a better time and not to take every opportunity to cash in now.

Issue: Agroton, 12.50% 14jul2019, USD

StatusDefaultCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
redeemedYesUkraine07/14/20197,550,000 USD-/NR/Withdrawn

Company: Agroton

Full company nameAgroton
Country of riskUkraine
IndustryAgriculture

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