Ukraine Markets Daily (February 01, 2017)

Market news

  • Mriya Agroholding targets USD 150 EBITDA per hectare of farmland in 2017

Market comment

The UX index increased by 0.5% Yesterday, while the PFTS index was up by 0.1% (in UAH term). The WIG-Ukraine index remained unchanged. On the interbank exchange market, the USD/UAH declined by 0.1% to UAH 27.10 (mid price), according to Bloomberg. The official exchange rate reported by the NBU was UAH 27.08.


Mriya Agroholding targets USD 150 EBITDA per hectare of farmland in 2017

The year of 2016 was the first operating period when Mriya harvested all its land bank in the amount of 160 thousands of hectares, the CEO of the company Simon Cherniavsky said in an interview to the Ukrainian ‘Business’ newspaper. Overall, Mriya controls 180 thousands hectare of land, however, 20 thousands of hectares are still undergoing audit. The financial results of the company for the year 2016 were poorer than targeted, though the operating results are positive, Cherniavsky says. Nevertheless, the net operating results are negative after accounting for expenditures related to the company’s restructuring, and the investments associated with the reinstatement of the technology park. Mriya intends to publish its full year results shortly after. As to the debt restructuring process, negotiations are still going with one of the most secured lenders – the IFC. In case of final agreement with the financial institution in February, Mriya expects to launch the final restructuring process in March of 2017, with a view on completing it by September of the current year. Under the restructuring terms agreed with the creditors and note holders of the company in September of 2016, Mriya’s indebtedness is reduced to USD 330 mn, including a USD 93 mn loan. USD 800 mn of the debt legacy will be converted into share capital of the newly recovered company. After the restructuring, Mriya’s shares will be distributed according to the following structure: 50% are allocated to unsecured lenders, 7.5% to providers of 2015 working capital, 35% to providers of 2016 working capital, and another 7.5% to the top management of the company as motivational package. The latest acquisition offer by Kernel Agroholding came as a surprise to Mriya’s management, its creditors, and note holders. However, the creditors have rejected the offer. Mriya is currently feeling fairly comfortable, fully ready for the next season, while being on track with its restructuring and debt settlement schedule. The company has secured all necessary financing for its operations in 2017, up to harvesting, the CEO claims. Mriya targets an EBITDA volume in the amount of over USD 150 per hectare in 2017, and up to USD 350 per hectare in 2019, deemed to be a standard for agricultural businesses. Any talk about a potential sale or acquisition of the company by a third party is currently premature, considering that the corporate restructuring is not completed yet. There is no urgent need for the sale of the company, Cherniavsky maintains. However, the creditors allow an audit of the company’s assets by pretenders in order to assess the subjects of future potential deals. Concerning the litigations to recover the assets of the company lost under the former management and owners, Mriya risks losing only a logistic base. The company expects, among others, to recover about 60 thousands hectares of the land bank formerly owned.

Our view:

The statement from Mriya is moderately POSITIVE, expressing confidence in the execution of the restructuring and recovery strategy of the company. Nevertheless, we see the company to be still struggling to put its operations on a sustainable track. Meanwhile, we consider that the company’s creditors and note holders do not exclude the attraction of third party investors into the company at an early stage of the restructuring and recovery process.