Kernel aims to wrap up waiver extension by year-end
Ukrainian sunflower oil producer and exporter Kernel is aiming to wrap up negotiations over the extension of waivers on bank facilities by the end of the year, according to a source familiar with the company.
Kernel signed an agreement with bank creditors in 2022 to postpone bilateral loan maturities until June 2023 and is currently negotiating a second extension to those loans. Kernel’s lenders include Natixis, ING, EBRD and EIB.
Securing an extension has been seen as a key stepping stone on the way to the company addressing its US$300m 6.5% October 2024 bond maturity. Although Kernel has a substantial amount of liquidity – at the start of August, the company held about US$1.15bn in accounts and an additional US$327mn of commodity inventories – this is needed for purposes outside of debt payments, said an analyst.
“Kernel, as a large farming operator, needs liquidity to finance its next sowing campaign,” the analyst said. “That is why it is hard for the company to allocate cash for debt repayment. We assume that Kernel will try to refinance the debt due in 2024.”
How the bond will be refinanced is far from clear. Although the cash price has been rising in recent weeks, the October 2024s are bid at 73, according to LSEG data, a price well below where it would be feasible to refinance with a straight new issue.
The liquidity that the company holds should help it in financing the restoration of damaged assets – in July, Kernel reported that its assets in the port of Chornomorsk were targeted by a Russian missile attack – and maintaining adequate working capital, the analyst said. “However, the current avenues for additional credit financing for Kernel are limited.”
In late August, Kernel announced it was looking to raise US$60m through a share offering to existing shareholders, which it will use to reduce its debt as a condition of the negotiations with its shareholders. A total of 216m shares were placed using a Dutch auction with final pricing of US$0.2777 each.
Kernel continues to service its debt. As well as the bank loans and the bond maturing next year, the company has a US$300m 6.75% October 2027 bond. That note is quoted at bid price of 63, according to LSEG data.