Avangard - Time to Refinance (February 2, 2015)
After approving a dividend payment of USD 29.5 mn on September 30, 2014 and declaring it to be paid by December 30, 2014, Avangard hasn’t made any transfers to investors yet. Moreover, the company has remained silent with regard to the reasons of the delay, which in our view has resulted in a stock price drop of 9% m/m to a historic low to USD 1.83 per GDR, while prices of the company’s Eurobonds have plummeted by 15 points to 50 cents on the dollar in January 2015. However, on Thursday, January 29, Avangard issued a press-release, announcing that the company intends to only pay the dividends to minority shareholders, while delaying the payment to its majority shareholder UkrLandFarming, which may reflect the limited access to capital necessary to finance the redemption of USD 200 mn of Eurobonds maturing in October 2015 and could signal a pending refinancing of the Eurobonds. Our scenarios indicate a fair price of 43-58 vs. the current price of 45.