The Luxembourg-based company Metalcorp is producing bauxite in the West African country Guinea. Now it cannot repay a EUR 70 million bond that came to maturity on Sunday. Many investors in Europe are suffering the damage.
Capital News Africa: From the Trading Floor – Week 40-2022
The statement was published on Monday 3 October: “Metalcorp Group seeks to postpone the final repayment of its 7.0% Notes due 2022.” More precisely, the repayment was due on 2 October. Nearly EUR 70 million are under fire. However, the company paid the interest due on the 2022 Notes.
This default concerns the five-year bond Metalcorp Group 2017/2022 (ISIN: DE000A19MDV0). The company issued last year another bond 2021/2026 (ISIN: DE000A3KRAP3) with a much higher volume of EUR 300 million. The last one comes to maturity in four years. The Frankfurt-based investment Bank M, a representation of FinTech Group Bank, accompanied the issuance of these two bonds.
Metalcorp was founded in 2003 and explores bauxite in Guinea, a state in the West of Africa. Metalcorp runs there the Société des Bauxites de Guinée and Taressa Mining Logistic which owns the licence for a site with a potential of 200 million tons of bauxite, the basis for the production of aluminum..
The aluminium price on international markets developed quite well. In the past five years, the S&P GSCI Aluminium index went up by 8.6%. The volatility, however, has been particularly high this year. The index lost 31.9% in the past six months, but gained 10.8% in the past five trading days.
“Metalcorp had planned to finance the repayment of the 2022 notes through a combination of its own cash, commodity financing, and from a term loan facility,” said Anouar Belli, a Metalcorp employee whose role at the company was not identified in the statement. “However, recent significant financial market turbulence has caused the group’s counterpart to renege on the term facility, reducing the liquidity available to Metalcorp.”
The company claims that the business in the first half of the year had gone “exceptionally” well. The turnover had increased by 68% to EUR 511.1 million and operational profit (Ebitda) by 53% to EUR 39.4 million. This favourable course of business had, according to Metalcorp, a negative impact on liquidity and working capital.
We asked Metalcorp’s investor relations manager how it was possible that Metalcorp published such promising business figures in the summer and got into such a liquidity crunch some weeks. He did not answer our question.
In addition to the credit not granted, the company cites another reason: “The continuing market turbulence, compounded by the uncertainty caused by Ecowas sanctions imposed on 22 September 2022 on the Republic of Guinea and endorsed by the U.S. Government on 27 September 2022, has resulted in the group being unable to secure replacement financing within the deadline.”
The credit rating agency S&P gave the five-year bond a B credit rating. B is the second-highest non-investment grade and means that an obligor is vulnerable, but currently has the capacity to meet its financial commitments. S&P confirmed this rating on 19 July and revised the outlook at that date from stable to positive. On Wednesday, the S&P rating was still at B. We asked Metalcorp's investor relations manager if S&P was in talks with the company about a potential downgrade. This question also remained unanswered.
Metalcorp plans to convene both the holders of the 2017/2022 bond as well as the holders of the 2021/2026 bond to a separate meeting of creditors and to ask the holders of the defaulted bond to approve two measures: a prolongation of the maturity up to one year and an increased interest rate of 8.5%. The holders of the 2021/2026 bond are asked to approve a negative pledge: “It simply means the waiver of the right to early termination, which, however – if at all, that depends on the resolution of the extraordinary meeting of the creditors of the 2022 bond would only be possible 30 days after non-payment at the earliest,” said Metalcorp’s CEO Carlos Leite in an interview with the news site Bond Guide.
The German association of small investors SdK is calling on the affected bondholders to unite and raises two points: “It is completely incomprehensible why the company only informs the bondholders one day after the due date that they cannot make the repayment,” the SdK said in a statement and added: “The general business strategy of the company also appears questionable from the point of view of the SdK.”
Not only the strategy lacks clarity. The ownership structure is also unclear. The search for the owners of the company gets lost in Monaco. Metalcorp’s main shareholder is the company Lunala Investments S.A. which is a 100% company of a company called Monaco Resources Group. So far, the track has been lost here.
However, this is still known: In a couple of years, Monaco Resources has made a steep ascent in Africa. “In less than ten years, Monaco Resources has become a major player in African commodities”, wrote the news site Africa Intelligence on 21 January 2020. “Until now, it has been quite secretive about its shareholders and the backgrounds of its executives.”
We can only confirm this statement. The latest annual report of Monaco Resources Group S.A.M. is signed by Ms Pascale Younès named with the title of Director. No other board members or shareholders are mentioned in any document Monaco Resources has published. Little is known about Ms Younès: Pascale Mitri Younès, born in May 1972, is a French citizen and resident in Monaco.