Russia suspends duty-free imports of Interpipe's pipes

Astrum

Since April 1, the Federal Customs Service of the Russian Federation started levying duties on imported pipes of Interpipe due to the lack of agreement on the size of 2Q10 quota for dutyfree imports. The final decision on the quota prolongation and its size should be approved on April 15.

In the case that there is no positive decision on the prolongation of the duty-free import of Interpipe’s pipes to Russia, the Group’s sales should go down significantly.

In 2009, Russian pipe market accounted for up to 40% of the Group’s sales, while Interpipe controlled Nyzhnyodniprovsk Pipe (NITR: U/R) and Novomoskovsk Pipe (NVTR: BUY) sold to Russia 46% and 26% of their pipes.

Interpipe fails to pay on Eurobond coupons

UR has written earlier about Interpipe's problems with its creditors. On February 5 Interpipe's Eurobond owners were waiting for the coupon payment, which have never materialized. The tranche on July 2007 $200 mln Eurobond issue should have amounted to $8.75 mln. Now the repayment of Eurobonds themselves, which is planned for August 2, 2010, is under threat.

It is rumored that most of the Eurobond issue belongs to Interpipe now and that non-payment of the tranche is a method of pressuring other Eurobond owners to agree for debt restructuring, once Interpipe offers it.

Two Ukrainians made it to FT's 50 emerging market leaders

Rinat Akhmetov and Viktor Pinchuk (who likes to be written as Victor though) are two Ukrainians who made it to the top 50 emerging market business leaders chosen by the Financial Times. Certainly, Rinat Akhmetov and Viktor Pinchuk are the most internationally visible and richest businessmen in Ukraine. Both of them have invested significantly lately to gain social and international recognition, which is definitely reflected in their being included in the list. Moreover, if compared to Russian oligarchs Ukraine's representatives are somewhat poorer they may boast more independence from the state.

Post-election redistribution of property: is it coming?

Presidential elections in Ukraine will stop the times of duality in Ukrainian power. The conflict between Orange revolution leaders Yulia Tymoshenko and Viktor Yushchenko are over whatever the result of the election. It is likely that early parliamentary and local elections will cement the victory of a presidential winner, whoever it will be. Once the power gets consolidated in the hands of one political camp the question is - will the other camp suffer or rather how exactly will it suffer.

Certainly, many bureaucrats will lose their positions due to elections (more in case of Yanukovich victory, provided YuliaTymoshenko already controls Cabinet of Ministers and is rather influential with many courts). But it is likely that some property is also destined to change hands. Many oligarchic businesses were built on shaky ground of discretionary bureaucratic decisions with respect to licenses, permits, access to monopolistic markets etc. Those kinds of businesses are likely to suffer after the president gets settled in his or her seat.

One of the likely targets in case of the Tymoshenko win will be Mr. Firtash, who has already lost his intermediary business in gas trade between Russia and Ukraine and is now trying to defend remnants of his business empire. Today OstChem Ukraine publishes a press-release that its stake in Crimean Titan enterprise is under threat due to government's decisions, which may lead to raider attack. Other likely targets of the second round of re-privatization may be in Mr. Pinchuk's business empire.

After Orange revolution Yuliya Tymoshenko has initiated reprivatization process, which came to a halt after a loud sale of Kryvorizhstal' plant to Arcelor Mittal. Kryvorizhstal' was privatized by a consortium of Viktor Pinchuk and Rinat Akhmetov for fraction of the market price.

In case Viktor Yanukovich wins property redistribution may also be likely, but it is less probable, provided his camp has suffered from it in 2005 and ardently protested any kinds of privatization revision. However, being the victim of the process in opposition is one thing - it is much harder to stay away from it once the opportunity is there.

Fitch downgrades Interpipe rating to Restricted Default

Fitch downgraded Interpipe Limited long-term default rating to ‘RD’ on Dec 18. Lowered ratings of the company are due to lack of understanding between the company and creditors as well as with Eurobond holders ($200 millions outstanding).

Fitch sees a considerable risk that Interpipe can default on paying back the loans once the period of extension agreed with the creditors runs out. Further postponement of payments should be agreed upon in January 2010 and Fitch expects these negotiations to be difficult.

Overall Interpipe owes $900 million at the end of the III quarter 2009. In September it was announced that Interpipe will seek additional financing from Barclays Capital and Citigroup Inc., which arranged the loan for the company in May 2008.

Earlier this year it was reported that Ukrainian billionaire Viktor Pinchuk wants to sell shares of Interpipe Ltd. in an IPO by the end of 2011.

Ukrainian companies restructure debt

Banks and companies in Ukraine continue to restructure their foreign debts offering their creditor higher dividends in return for longer maturity. Konstantin Zhevago's bank Finance and Credit decided to restructure 95% of its debt until 25th January 2014 increasing the coupon payment to 10,5% (instead of 10,375%) with twice a year payments. UR has mentioned that Zhevago's Ferrexpo was recently successful in attracting USD 230 m financing facility. Vlast Deneg Journal (50/2009) also mentions that Viktor Pinchuk's Interpripe Limisted started negotiations with its eurobond's holders on concluding contracts that will make them refuse any actions leading to cross-default.

The year of 2010 will become critical for lots of Ukrainian companies who just approached default in 2009. Looks like next year we will see much more corporate defaults in Ukraine. Ukraine's economy will stabilize, just as the IFIs tell us, but it is likely to be a stabilization at the bottom of a deep well. Thus, unable to generate profits to pay off their debts corporations and banks will hit tough times about the spring of 2010.

Therefore, those who look ahead desperately try to restructure their debts now.

UPDATE. On Dec 18 Fitsch downgraded Pinchuk's Interpipe Limited company from "CCC" to "RD" - restricted default rating.