The mining and steel group Metinvest is seeking a new investor to finance a €3bn ($3.4bn) steelworks in Italy, as the Ukrainian group seeks to reduce its liabilities, according to Bloomberg.
According to the agency, the group is seeking an additional partner for the project at the site of the former steelworks in Piombino on the Tuscan coast. The company wishes to strengthen its financing “given the risks associated with the war and Metinvest’s significant operational presence in Ukraine”.
However, it is noted that some potential lenders have become more cautious due to heightened geopolitical risks, in particular the recent conflict in the Middle East.
“As regards the debt capital structure, we have a clear understanding of it, and we are continuing our dialogue with financial institutions to finalise this aspect as well,” Metinvest told the agency.
It is worth noting that the Italian government has designated this initiative as a ‘national strategic project’, and Metinvest Adria – a joint venture (JV) established last year with the Danieli Group to build this state-of-the-art facility – describes the project as “the revival of steel in Italy”. It is expected to produce 2.7 million tonnes of low-carbon steel per year and create 1,100 jobs in the region.
According to the original plan, the financing was to consist of borrowed funds, government grants and contributions from the JV partners to the share capital. Metinvest agreed to contribute more than €500 million, or 75 per cent of the total equity capital, but is now seeking to reduce this amount to less than €300 million.
Bloomberg adds that Metinvest has reported receiving “significant support from all stakeholders”, in particular from the Italian government, which has already approved grants and loan guarantees and allocated funds for the construction of a new berth at the port of P’Ommino.
“Metinvest’s financial position deteriorated after the company was forced to use its cash reserves in April to redeem bonds worth $428 million. Some of the company’s assets in Ukraine were lost or damaged as a result of the Russian invasion. Operations were also negatively affected by high energy costs and labour shortages,” the report states.
Furthermore, it is noted that this month, S&P Global Ratings upgraded Metinvest’s credit rating following the bond repayment, but maintained a ‘negative’ outlook on the business, highlighting the need to build up cash reserves. According to S&P, Metinvest’s free cash flow stood at $150 million at the start of May.
Metinvest is considering the possibility of raising long-term financing and has recently held meetings with investors to discuss the pricing and structure of a potential bond issue. Like most Ukrainian companies, Metinvest has not tapped the bond market since the start of the full-scale invasion in 2022. Despite this, the group has managed to meet its financial obligations and reduce its debt burden, according to a Bloomberg report.
Metinvest is a vertically integrated group comprising mining and steelmaking operations. Its operations are located in Ukraine — in the Donetsk, Luhansk, Zaporizhzhia and Dnipropetrovsk regions — as well as in the European Union, the UK and the US. The holding company’s main shareholders are the SCM Group (71.24%) and Smart Holding (23.76%). Metinvest Holding LLC is the management company of the Metinvest Group.