Metinvest Group announced it is in default. This announcement was posted on the group's official website along with its 2014 financial report.
"In parallel with today's publication of its 2014 financial results, the Group announced that it is in default and is commencing three projects to obtain consent from holders of its bonds maturing in 2015, 2017, and 2018. The purpose of these projects (one project for each issue) is to defer the repayment of the principal amount of the bonds maturing on 20 May 2015, and to obtain consent from bondholders to waive their rights to make claims in connection with certain past and future events of default on bonds maturing in 2015, 2017, and 2018. Negotiations with creditors regarding pre-export financing are ongoing, including with the aim of signing a standstill agreement and agreeing to waive claims in connection with the failure to fulfill certain obligations, which will pave the way for a broader restructuring of the Group's debt," according to Metinvest's official website.
"The Group's financial results for 2014 tell the story of two completely different half-years. Our results were good in the first six months. In the second half of the year, we faced significant challenges from the economic and political situation in Ukraine, as well as pressure from global prices for our products. The fourth quarter was particularly challenging.
Our ability to grow underlying profitability for the year broadly reflects the soundness of our long-term commitment to conservative financial management.
Despite the profound business challenges experienced throughout 2014, Metinvest managed to contain its revenue decline to 18%. Exchange rate effects played a key role in the 14% increase in EBITDA. However, strong underlying growth in the first half of the year was undermined by a deteriorating operating environment in the second half. Profitability declined in the third and fourth quarters.
Due to market turbulence and a deteriorating environment for Ukrainian borrowers, Metinvest's liquidity situation has become challenging, particularly given the risk of a full or partial loss of our $350 million trade finance lines.
Although Metinvest fulfilled its debt obligations, the Group, like other Ukrainian companies, was unable to obtain financing on domestic and international debt capital markets. In light of the above, we have initiated negotiations with pre-export financing lenders to obtain waivers in the event of default on certain obligations, and this morning we initiated three projects to obtain bondholder consents for maturities in 2015, 2017, and 2018.
The aforementioned bondholder consent processes and pre-export financing negotiations with creditors are aimed at obtaining a deferment of the principal repayments on the 2015 bonds maturing in May and a waiver of certain default events for the period until January 31, 2016. This will provide sufficient time to negotiate, with the assistance of our financial and legal advisors, a transparent and fair rescheduling of our debt," said Alexey Kutepov, Metinvest's Chief Financial Officer, commenting on the results.
According to the released audited consolidated financial results for 2014, net profit decreased mainly due to higher finance costs, resulting in a net margin of 2% compared to 3% in 2013.
Consolidated revenue in 2014 decreased by 18% to $10,565 billion, adjusted EBITDA increased by 14% to $2,702 billion with a profitability of 26% (in 2013 it was 18%).
The group's press release clarified that adjusted EBITDA is calculated as profit before tax, before financial income and expenses, depreciation, impairment and revaluation of fixed assets, sponsorship and other charitable payments, the share of results of associates and other expenses on activities that management considers non-core, plus the share of EBITDA in joint ventures.
Pre-tax profit fell 52% to $370 million.
As a reminder, this morning a report emerged that Metinvest had agreed to defer until 2016 the repayment of the remaining $90 million in debt on Seller Notes issued in 2009 to pay for the purchase of the American United Coal.
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