Ukrainian poultry producer MHP has launched a consent solicitation after saying it was not planning to pay a coupon that was due on March 19 for its US$350m 6.25% September 2029s, as it looks to preserve cash in the face of a number of huge disruptions to its business following Russia's invasion of Ukraine.
The consent solicitation is targeting the company's 2029s as well as its US$500m 7.75% 2024s and its US$550m 6.95% 2026s. The next coupons on those bonds are due on May 10 and April 3, respectively, and MHP said it is also unlikely to meet those payments.
MHP is therefore seeking the implementation of a 270-day extension of the grace period, called a "support period", as well as some further amendments to the bonds' indentures.
"The company is launching the consent solicitation in order to help preserve its liquidity in a very turbulent and uncertain environment, which will assist it in ensuring the continuity of its business in the short, medium and long term," said MHP in a statement.
"In light of the upcoming sowing campaign, the company must continue its current operating activities so that it can ensure the production and supply of grains to Ukrainian consumers and be ready to begin exporting again when the opportunity arises."
Unpaid interest payments will continue accruing during the support period. "The company has already requested its bank lenders holding in aggregate US$126m to agree to a general postponement of debt servicing in the current environment. The postponement to servicing of debt facilities is sought for a period no shorter than the requested Support Period from the holders," said MHP.
The consent is expected to expire on March 30. JP Morgan is consent solicitation agent.
The 2029s are quoted at 38/45, according to Tradeweb.
Last week IFR reported that the company was preparing a bondholder identification list heading into the weekend. A source close to the company said last week that it is not planning to default.
Russia's attack on Ukraine has had a huge impact on MHP's production and sales, significant supply chain disruptions, destroyed stocks as well as limited access to stocks in certain territories. MHP has also been providing humanitarian aid, in the form of food supply, to the population of Ukraine.
The disruptions are taking their toll on MHP's financial position. Among other things, "MHP is preparing for its 2022 sowing campaign which has associated working capital requirements. Realisation of the sowing campaign will be crucial for the continuity of the business. The success of the harvest is also expected to contribute to food security in Ukraine and internationally," said the company.
"While, under normal conditions, the sowing campaign is predominantly financed through the company's working capital facilities, the vast majority of the company's existing facilities are not available (including US$154m) due to liquidity constraints in the Ukrainian banking system."
Currency controls imposed by the National Bank of Ukraine on February 24 have prohibited cross-border payments out of Ukraine, save for certain limited exemptions, such as operations of Ukrainian banks and payments of the government of Ukraine. Individual permits are required for payments, which do not fall under the exceptions umbrella.
"Currently, in practice such individual permits have not been issued to private legal entities," said MHP.
Like many Ukrainian entities, MHP’s business has been through the wringer since Russia’s annexation of Crimea. The company only returned to net profit in 2016, when it made US$69m after net losses of US$126m in 2015 and US$412m in 2014. But despite all the hardships, and unlike other corporates from Ukraine, it did not undertake a debt restructuring and continued to service its debt.
Updated story: Adds consent solicitation details