Ukrainian Kernel in talks to defer repayment of debt obligations until July 2024

MOSCOW. Aug 21 (Interfax) - Ukrainian agricultural holding Kernel is negotiating with creditors to extend the term of waivers for another year through June 30, 2024, Ukrainian media reported, citing a press release from the company.

"At the moment, the process of agreeing the extension with most creditors is still ongoing. However, the group has signed on all credit lines either 1) temporary moratoriums (standstills); 2) extensions; or 3) new refusals and consents pending final agreement with those creditors with whom the extension has not yet been completed," Kernel said.

The agricultural holding noted that interest would continue to accrue and be paid in accordance with the terms of the loan agreements, the holding said. "The company also currently pays and intends to continue paying interest on Eurobonds," the press release says.

Negotiations with creditors were initiated in the spring of 2023, taking into account the continuation of the military operation in Ukraine.

Previous waiver letters had been signed in relation to Natixis PXF, ING PXF, EBRD and EIB loans in order to maintain stability and preserve the business and its assets for the period up to June 3, 2023, the holding said. Therefore, the agricultural holding achieved deferment of any repayment of the principal amount of the debt and rejection of potential or actual defaults or default events arising from the conflict in Ukraine, but still paid interest.

The agricultural holding has already agreed the main conditions for extending the deadlines until June 30, 2024 with those creditors who have not yet signed new refusals and consents,. These arrangements are still subject to final approval by the credit committees of each lender. Their fundamental conditions, in addition to extending the validity period until June 30, 2024, are the formation of a basket of capital expenditures sufficient to maintain the current scale of activities, and a new injection of capital into the holding of at least $60 million.

The release says that, as of July 31, Kernel had $1.445 in interest-bearing debt (bank loan principal and Eurobonds, excluding accrued interest and leasing obligations), $1.148 billion in cash and equivalents and $327 million of commodity reserves, including 1.282 million tonnes of grain, 103,000 tonnes of oilseeds, 147,000 tonnes of sunflower oil and 111,000 tonnes of sunflower meal.

A significant portion of the accumulated liquidity will be spent in fiscal year 2024 [Begins July 1, 2023] to replenish working capital, capital expenditures for the development of an alternative export route across the Danube, repair of damaged facilities, completion of construction and commissioning of an oil extraction plant in western Ukraine, as well as to close a maintenance backlog as a result of liquidity preservation measures taken in fiscal 2022-2023, the report said.

The Group is considering investments in rolling stock, grain transshipment facilities on the Danube River and a river fleet to generate a monthly export volume of around 300,000 tonnes, with an estimated capital expenditure of around $50 million. The Group does not have access to credit from banks, instead relying on accumulated funds. However, it is continuing negotiations with various financial institutions for the provision of credit lines to replenish working capital or capital investments. Uncertainty about VAT refunds in the future and the possible risk of devaluation of the Ukrainian hryvnia increase the risk of significant currency losses, Kernel said.

Regarding its delisting, which was first announced in early March of this year, the company says it filed an application with the Polish Financial Supervisory Authority on May 15, and submitted an additional legal memorandum and other documents requested by the regulator on July 13. Then, on August 1, Kernel sent a letter to the PFSA objecting to the petitions filed with the regulator in this case.

"At the time of publication of this report, the company has not received any additional information about the timing of the PFSA decision," the company said.

Kernel is a major producer and exporter of sunflower oil. In addition, it is engaged in the cultivation and sales of agricultural products.

The largest co-owner of Kernel is Ukrainian businessman Andrey Verevsky via Namsen Ltd. This year, Verevsky, as part of the buyout and delisting of the agricultural holding from the Warsaw Stock Exchange, increased his stake in the holding from 41.3% to 74.05%.

Kernel's net profit for the nine months of FY2023 (July 2022 - March 2023) increased 36% to $437 million, while revenue decreased 45% to $2.715 billion.