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Concorde Capital Research: Ukrzaliznytsia calls meeting to exchange its Eurobond for Feb. 17

January 20, 2016 | Cbonds

Ukraine’s railway monopoly Ukrzaliznytsia (RAILUA) announced on Jan. 19 it will hold a bondholder meeting on Feb. 17 to approve the restructuring of its USD 500 mln in Eurobonds initially maturing in May 2018. The restructuring will be conducted in the form of a 1:1 exchange of the existing notes (with a coupon rate of 9.5%) into new ones, the terms of which were disclosed by Ukrzaliznytsia on Dec. 8.

In particular, the new notes will have a final maturity date of Sept. 15, 2021 and an amortization schedule (vs. a bullet repayment on May 21, 2018 for the current notes). 30% of the new notes will be repaid on March 15 and Sept. 15 of 2019, and 10% of the bond will be repaid semi-annually between March 15, 2020 and Sept. 15, 2021. The coupon rate on the new bond will be 9.875%, to be paid semi-annually. The first coupon period on the new notes starts on Nov. 21, 2015 (the date of the payment of the last coupon on the existing bond) and ends on March 15, 2016. Therefore, no accrued interest on the existing notes will be paid by the issuer during the exchange.

The deadline for bondholders to deliver their voting instructions is Feb. 12. The quorum at the meeting is 2/3 of holders of bond outstanding, and approval rate for the exchange resolution is 3/4 of all votes. If the resolution is passed at the meeting, it will be binding for all the bondholders. In case quorum is not reached at the Feb. 17 meeting, an adjourned meeting will be called on March 3, with a quorum of 1/3.

Alexander Paraschiy: Ukrzaliznytsia earlier reported that the ad hoc committee of its bondholder approved such conditions, so we see little risk that such an exchange won’t be approved by the majority of bondholders. With the announced restructuring conditions in place, the existing RAILUA Eurobonds would yield 16.5% to their ultimate maturity (at the current RAILUA price of 83% of par), which is a 450 spread to the Eurobonds of state banks. That spread looks high enough to make RAILUA an attractive investment, at least for the short term.

Company: Ukrzaliznitsya

Full company nameThe State Administration of the Ukrainian railway Ukrzaliznitsya
Country of riskUkraine
Country of registrationUkraine
IndustryTransportation

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