TMK, the country's second-largest maker of pipes for oil and gas producers, is selling $412 million of convertible bonds to refinance its short-term debt.
The coupon on five-year securities was set at 5.25 percent, the Moscow-based company said in a statement late Thursday. The offering was increased from the roughly $350 million that the company had earlier said it was planning to issue.
Each bond is convertible into a depositary receipt, which represents four shares. The conversion price is $23.075 per depositary receipt, representing a 30 percent premium to the reference price of $17.75, TMK said.
TMK is following steelmaker Evraz Group, oil producer Alliance Oil and gold miner Petropavlovsk in offering convertible bonds rather than straight foreign-currency notes as Russian companies seek alternative ways to refinance their debt after the global financial crisis cut access to funding. The pipe maker sold $600 million of bonds in July 2008 in its most recent debt offering, Bloomberg data show.
TMK said Feb. 3 that it reached an agreement on extending a $450 million one-year loan from VTB Group until 2012. Net debt was $3.56 billion on June 30, it said in October.
Renaissance Capital's Andrei Markov said in a note Friday that Dmitry Pumpyansky, majority owner of steel pipe maker TMK, pledged two thirds of his 75 percent stake in the company as collateral for loans last year.
Markov, a credit analyst with the Moscow investment bank, made the calculation by analyzing a circular sent to investors ahead of Thursday's $412 million convertible bond placement.
The circular shows that Pumpyansky owns 75 percent of TMK via a Cyprus-based holding company, TMK Steel.
"Regarding Pumpyansky's stake, it is clearly stated in the prospectus that Gazprombank has a 25 percent plus 1 [share] stake as collateral and VTB another 25 percent plus 1 [share]," Markov said.
"Given that TMK Steel's shareholding in TMK is 74.8 percent, no other shareholders could pledge such a stake."
TMK Steel pledged the shares in 2009 in order to borrow $1.108 billion from Gazprombank and $750 million from VTB.
TMK declined to comment on the collateral issue.
Markov added that TMK's high level of collateralized debt is not likely to impact its ability to attract further loans from Russian banks.
"I don't think it will cause any problems because TMK historically has had good relations with Sberbank and other Russian state banks," he said.
TMK also said it may not be in compliance with financial covenants related to its debt burden when it releases full-year results.
In addition, TMK said its unsecured debt could be downgraded because of earlier moves that increased the levels of its secured debt.
"We have been proactively approaching the relevant lenders to address our inability to comply with certain financial covenants in relation to our full year results for 2009, including seeking waivers or standstill letters from our lenders as necessary," the company said in the circular.
It also said it has received assurances from its lenders that they will not call an event of default should TMK violate loan covenants.
The company is scheduled to release its full-year 2009 results at an unspecified date in April 2010.
(Bloomberg, Reuters)
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