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ULF to restructure coupon payments; asks for default action waivers

April 01, 2016 | Cbonds

UkrLandFarming (ULF) launched a consent solicitation regarding $500 mn of 2018 Notes. ULF seeks to restructure the next two coupon payments of 5.4375% on Mar 26 and Sep 26, 2016. The offer entails a 1.25% cash payment and 4.1875% PIK payable on the maturity date. In addition, ULF informed the bondholders that a cross-default has occurred in connection with three loan facilities: 1) EUR 20.9 mn by Avangardco from Intesa, 2) USD 44.6 mn by ULF to Export Development Canada (EDC), and $200.7 mn by ULF from Sberbank and Deutsche Bank. The total amount past due on the three facilities is close to $170 mn. None of these loans have been accelerated yet. Under the solicitation, ULF is also asking the bondholders to waive any event of the default that has occurred or will occur under these three facilities until Oct 31, 2016. Those who are willing to support the extraordinary resolution before the solicitation date of April 19, 2016 will receive a cash payment of $1.25 per $1000 notional as a solicitation fee. ULF maintains a group of bondholders that own 40% of the outstanding amount already agreed to the terms of the extraordinary resolution.

Art Capital view:
The problem paying the coupons as well as significant overdue loan amounts point to a severe liquidity crunch at ULF. Therefore, the current request should be viewed as a necessary first step to avoid acceleration of the 2018 notes, which will be followed by a profound restructuring plan covering the remainder of the payments. The PIK approach has already been used in conjunction with the AVGR notes restructuring in the fall of 2015. Under the current yield of 96% on the 2018 notes, the deferred coupon payments shave 5 pts off today’s price of 30. However, the price could be more sensitive to the market’s assessment of the company’s sustainability in light of the ongoing financial crisis than to the minor tweaks to coupon timing.

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