Avangard has successfully restructured its USD 200 mln Eurobond, postponing the maturity by 3 years and leaving the rate unchanged at 10%. The company also managed to secure a partial coupon capitalization clause. The market has viewed the terms as relatively favorable, pushing the AVINPU price from 39 to 45 after the announcement. The deal offers Avangard much-needed debt servicing relief and the company is now better placed to regain its footing in the market in the mid-term. However, given the lingering liquidity problems, we believe the company will still be unable to accumulate the over USD 235 mln in cash it needs over the next three years. The issuer is still facing operational and financial challenges due to poor demand domestically and externally, which has fed into narrowing profitability margins and a deterioration in working capital turnover ratios. As a result, the company may need to seek a new, partial restructuring of debt ahead of the Eurobonds' October 2018 maturity. We expect to re-initiate rated coverage of Avangard stock after the company discloses 3Q15 financials.

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