UTair and prospects for Finance-Avia bonds
One guy wanted to write a post on the topic, but he didn’t have time yet.
Another one also failed.
We need a professional opinion from bond/risk specialists
Let's discuss the situation.
Bonds fell to 30% of the nominal value, one to one like three years ago in November 2015.
Debt/EBITDA then, due to devaluation and the crisis, increased to 15, and then became negative due to negative EBITDA.
The entire sector shook.
The debt itself was more than 100,000,000,000 rubles.
We need to remind you. that the initial terms were unfavorable and the bondholders and creditors negotiated, and the bondholders eventually won better terms.
As is known, without the approval of 75% of the issue holders, restructuring is impossible.
https://www.vedomosti.ru/business/articles/2015/11/20/617659-aviakompaniya-yuteir-zavershila-restrukturizatsiyu-dolga
“The creditors and the company met each other halfway; they were impressed by the situation with Transaero. Everyone understood that the state would not save the companies; they could either lose money or agree to the current terms of the restructuring,” says a source close to one of the parties to the negotiations.
Debt fell due to:
a) additional issue in favor of NPF Surgutneftegaz and the regions (KhMAO and Tyumen region).
b) reduction of the fleet, return of leased aircraft.
Transportation grew from 5.664 million people in 2015 to 7.627 million people in LTM equivalent as of October 2021.
Insiders began to sell securities in advance.
December 7, 2021 news comes out:
https://www.utair.ru/about/news/utair-restrukturiruet-dolg/
The restructuring will increase Utair's competitiveness in the aviation market and will help the company expand its route network in the regions of Russia. Utair began to restructure its debt obligations in advance in the context of an unstable situation in the aviation market due to rising fuel prices and fluctuations in the exchange rate. In 2021, the average cost of a ton of kerosene for the company increased by 35%, and the share of fuel accounted for 30% of all Utair expenses. The restructuring will optimize debt servicing costs and free up resources for operating activities. The restructuring consultant is Raiffeisenbank, which successfully established itself as a consultant on the comprehensive restructuring of Utair’s debts in 2015. “It is important to approach the process of debt portfolio restructuring in a timely and comprehensive manner. Negotiations with banks have already begun, the general principles and conditions of the restructuring will be presented along with an updated financial model,” notes Dmitry Sredin, head of the department for work with large companies, managing director of Raiffeisenbank. Thanks to strict control of costs and increasing passenger traffic, Utair fulfills all financial obligations under loan and leasing agreements in full and on time. To date, the amount of interest paid on the restructured debt has exceeded RUB 8.2 billion. “Utair has no delays in interest payments and no overdue debts to creditors, including banks. Timely fulfillment of debt obligations is a priority of the company’s financial model, but economic factors dictate the need to revise existing payment schedules. Constructive participation of creditors in the restructuring will ensure continuity of operation and financial stability of one of the largest regional carriers in Russia. Utair will be able to maintain economical fares and a high level of flight safety for passengers,” commented Andrey Martirosov, General Director of Avia PJSC.
UTair is losing market share from the 5th airline to the 6th.
And there was No. 3 once and even at the moment No. 2.
Last time the conditions were cruel for those who took 100%.
A little background on the files.
YuTeyr_obligatsii
Indikativnye_uslovia_restruktkrizatsii_versia_3
For 100% of the face value purchased for 30%, they gave 15% cash, 25% Finance-Avia 1 and 60% Finance-Avia 2. Plus the NKD was restructured accordingly.
What will happen now? How will creditors bend? Will the company be saved without replacing ineffective management?
What do you think? We don't have any specifics yet.
At the AGM of Ural Airlines, management hinted at the departure of UTair.
5. Denis asked: “In 2014, you clearly predicted the departure of a number of major players.” What's this year? I believe that 1 company will leave this year. He got confused with 6 types of aircraft and couldn't cope.
Finance-Avia 1 was issued for 1.5 billion rubles, that is, this debt was not critical for the airline and was the first to be repaid. But they didn’t have time to get through.
Playing with creditors is dangerous for the company—the shares are pledged.
The company may split up or sell the helicopter business, plus sell the Surgut airport.
In fact, the fork is very serious:
1. Writing off a body part or reducing interest is robbery in broad daylight.
2. Let’s say they extend the loans until 2040 or ask for a moratorium on payments, but then this is just masking the problems, so the company will not be able to survive.
Probably the first option is still better for everyone, but here it is necessary to simultaneously change the management and recapitalize the company. In the worst case scenario, Surgutneftegaz “will be asked to help.”
Raiffeisen will publish details soon, obviously before the January coupon.
On the one hand, the company’s position is better than three years ago, but on the other hand, then there was Transaero, due to the share of which everyone grew up.
Investment idea No. 12.3 Finance-Avia bonds 1
Finance-Avia LLC paid the coupon income for the second coupon period on bonds of series 01 and for the third coupon period on bonds of series 02, the company reports.
The accrued coupon income for one security of series 01 amounted to 41.59 rubles. at the rate of 8.25% per annum, for one bond of series 02 - 0.05 rubles. based on a coupon rate of 0.01% per annum. The total amount of payments under the obligation for bonds of series 01 amounted to 171,417,344 rubles, for series 02 - 458,962.95 rubles.
Issues with a nominal volume of 10 billion rubles each were placed on December 2, 2015 as part of the restructuring of UTair-Finance bonds. The placed volume of bonds of series 01 is 4 billion 121.600 million rubles, series 02 - 9 billion 179.259 million rubles. According to the terms of the issue, payment of the next bond coupons is scheduled for July 31, 2021.
Bonds pulled back from 75% to 70%.
So, now the securities are trading with a 22% yield!!!
When we started, 2022 was far away, but now everything is clear.
Here is a chart from Income, Russian bonds are rallying.
Here is a fresh review on the topic, especially since the anti-OFZ sanctions have disappeared, perhaps temporarily. Just in time there will be a new minimum in profitability. And this will be a significant event.
https://bonds.finam.ru/comments/item/bk-region-spros-na-ofz-prodolzhaet-rasti-snizhaya-doxodnost/
https://bonds.finam.ru/comments/item/finam-ralli-na-rynke-obligaciiy-prodolzhaetsya/
The rate increased to 9%. And it will be 10%.
This paper is three times better than a deposit!!!
For those who don’t like complex bond mathematics, simply put, you buy paper for 710 rubles and receive a 90 ruble coupon in a year. This is 12.7%.
Better than most dividend stocks.
But the trick here is that everything will be returned to the body, and they will begin to pay in 2021, that is, in two years the paper may cost 100% or 1000 rubles (if not more, depending on what the rates are).
Total +180 rubles coupon (+reinvestment) +290 body height. Total +470 rubles for two years. This is +66%. Do you think the Moscow Exchange index will grow by that much? This is 3840 points. May be. Most participants will not be able to beat even the index.
In the very, very worst case, you will have to wait for repayment (+22% annually, and this is steeper than the average annual return of the index)
Let there be some kind of “Alyonka effect”, but there are sellers there and there are just a lot of them and that’s good. This is probably a fund that received shares from UTair, and anything below 75% is an incredible sell-off. I keep the papers myself and even bought more after paying the coupon. If they grow, I’ll be happy, but I’m also happy about the coupons. Each reduction in the Central Bank rate should increase the value of such an asset. And the next decline is likely on February 9th.
Let me remind you of the composition of shareholders.
1/2 is the State
1/2 is Surgutneftegaz
These are extremely reliable shareholders; neither Transaero nor VIM-Avia had such shareholders.
In essence, this is a quasi-government paper with a yield above 20%.
An excellent alternative to deposits and long-term second-tier securities.
Bonds UTair Finance
Colleagues, good day everyone! A couple of questions: 1) Do I understand correctly that the latest information regarding the current status is the message below from Albert Yeritsyan? Case No. A40-124534/2020 can be joined. 2) Since the broker wrote off the bonds from the securities accounts, is it possible to require the broker as a tax agent to recognize this write-off as a loss and reduce the tax base? Can the broker include these write-offs in the loss certificate?
Derril Derril, Answers: 1) yes, this is the latest information.
It is not only possible, but also necessary to join Case No. A40-124534/2020. 2) The court is required to invalidate void Agreements on novation from the moment of conclusion. In addition, the court filed demands for the restoration of bonds in the DEPO accounts of the owners, since they were written off on the basis of insignificant transactions. This may cause the need to adjust the tax return if you declare a write-off as a loss in this tax period when the court satisfies the stated group claims in the next tax period. Consider these consequences of the court's decision in this case. PS These, quite justified, questions arose due to the continuous delay in the consideration of cases in court by the lawyers of Finance-Avia LLC in the hope that the owners will get used to the situation and take actions aimed at recognizing the validity of the Innovation Agreements in order to appeal later to paragraph 5 of Art. 166 of the Civil Code of the Russian Federation establishing: “A statement about the invalidity of a transaction has no legal significance if the person referring to the invalidity of the transaction acts in bad faith, in particular if his behavior after the conclusion of the transaction gave grounds for other persons to rely on the validity of the transaction.” Unfortunately, Finance-Avia LLC managed to significantly delay the judicial consideration of the issue of invalidity of novation agreements from 09/05/2019. (filing of the first claim to invalidate the novation agreements even before the very first court hearing in Khanty-Mansi Autonomous Okrug-YUGRA) the court recognized this claim as individual on 06/17/2020 (on the day the bonds were written off). Therefore, on July 21, 2020, a class action lawsuit was filed in case No. A40-124534/2020, which was already accepted by the court as a class action (a ruling was made by the Moscow Court), and the case on an individual claim was suspended in connection with the consideration of the class action lawsuit in case No. A40-124534 /2020. Such a delay in these cases, along with the refusal to recognize the OSVO as invalid in the case of S.V. Davydovsky, which is on appeal in Omsk and a court hearing will take place on January 26, 2021, may create the basis for complete resignation to the artificially created situation and, even, acceptance of the terms of the agreements on innovations as “a gift from heaven and the path to salvation.”
But I don’t think we should despair... I have reason to believe so.
