LONDON, Jan 17 (IFR) - One of the world’s largest exporters of sunflower oil is poised to become the first Ukrainian corporate to issue a bond since 2013.
Kernel Holdings, an agribusiness headquartered in Ukraine and with a listing on the Warsaw Stock Exchange, has hired ING and JP Morgan to arrange investor meetings in Europe and the US from Thursday ahead of a potential debut five-year US dollar deal.
The company is likely to offer a healthy yield to entice investors, although a source familiar with the deal said it was too early to speculate what sort of level would be needed.
With 95% of its Ebitda and revenues in hard currency and kept offshore, Kernel is rated above the sovereign - two notches by Fitch, at B+, and one notch by Standard & Poor’s, at B. Ukraine has a Sep 2022 bond trading at 8.11%, according to Thomson Reuters data.
“Kernel intends to improve its debt structure by substituting its mostly short-term debt with a five-year benchmark Eurobond issue and/or new three-year pre-export financing facilities,” said Fitch, which has the company on rating watch positive.
“As a result, post-refinancing most of Kernel’s current debt (approximately US$600m as of January 2017) would carry maturities of between three and five years and there will be sufficient, long-dated extra resources to cover working capital peaks.”
The company has made strong progress since the end of its fiscal year in 2014 when it announced a net loss of US$98.3m. In it last fiscal year, which ended on June 30, the company made a net profit of US$225.2m. It made an operating profit before working capital changes of US$330.5m.
Its credit metrics are also healthy, with net debt to adjusted Ebitda of just 0.3x at the end of the last fiscal year. That compares with 2x as of June 30 2014.
The deal is likely to generate plenty of interest given the lack of high-yield issuance from CEEMEA, and the dearth of deals from Ukraine in particular. The last bond from a Ukrainian corporate that wasn’t a part of a debt restructuring came in June 2013, when Ukrlandfarming tapped a Mar 2018 bond for US$75m.
The last benchmark was from Ukrainian Railways in May 2013, which raised US$500m through May 2018s.
Kernel’s announcement comes on the same day that the Ukrainian and Russia governments begin a battle in the English High Court to resolve a dispute over a US$3bn Eurobond, reports Reuters.
The debt at the heart of the dispute was sold in late December 2013 by then-Ukrainian president Yanukovich to Russia, less than two months before his Moscow-backed government was ousted by street protests that swept the country.
Russia wants full repayment, arguing the debt is bilateral between two sovereigns. Ukraine has refused to pay, arguing the bonds, which were structured under English law, should be included as part of the sovereign’s broader debt restructuring. (Reporting by Sudip Roy; editing by Julian Baker)