CEEMEA Credit Wrap 2023
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Patience Pays Out in Corporate Distress but Sovereign Restructurings Prove Hard to Unlock
After a bruising 2022 dominated by Russia’s full-scale invasion of Ukraine, 2023 has been a lucrative year for the brave investors who ventured into distressed Ukrainian credits and certain special situations. A number of the high-profile issuers adopted a creditor-friendly approach allowing for several 40 to 45 point recoveries during the year.
The 2023 macroeconomic backdrop for high-yield borrowers in CEEMEA has been challenging to say the least – particularly on interest expenses. The U.S. base rate on which CEEMEA companies typically pay a 5% to 10% premium had soared from a comfortable 25 bps before Moscow’s invasion in 2022, to 450 bps by the start of 2023. The new interest cost reality meant many CEEMEA issuers stepped away from the wider capital markets, seeking tailored funding solutions at survivable rates instead.
Ukrainian grain and poultry producer MHP raised $400 million in fresh development finance in September to buy back its $500 million 7.75% 2024 bonds, which are currently trading in the mid-90s, 45 points higher than in January. In its second buyback attempt launched this week, MHP is offering investors 95 cents on the dollar, up from 85 cents in the first tender.
Meanwhile in Russia, eurobond issuers have endured their first full year locked out of Western capital markets following the unprecedented 2022 sanctions. Routine dollar refinancings for strong commodity exporters are now off the table and even Russian cash redemptions struggle to make it through the blocked payment systems. Several companies with multi-billion dollar capital structures have ceased reporting altogether. In June, Reorg hosted a webinar on the impact of sanctions in distressed situations and debt restructuring.
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