Metalastan is a little-known former Soviet republic located near Russia and Kazakhstan. One of its major privatized companies, CopperCo, prospered in the new millennium as demand for copper increased worldwide.? The company was rated BB+ and aggressively borrowed in dollars to make acquisitions in many countries outside of Metalastan to become the world's 3rd?largest copper producer. Yet many of these acquisitions were at the top of market prices. When commodity crisis ensued in 2010-2014, copper prices plummeted 70%, forcing the company to cease interest payments on $5 billion of bonds due in 2014. CopperCo is one of the country?s largest employers, and Metalastan wants the company to survive.? Cash strapped, the government of Metalastan made a senior loan to CopperCo, with warrants to buy up to 20% of the company?s equity. Credit spreads on Metalastan sovereign debt (rated BB+, viewed as ?stable? by the rating agencies), which had been as low as 240 bps. above US Treasuries in early 2007, had soared to 800 bps. during the credit crisis in 2009 but has now come down to 490 bps. above US Treasuries. (FOR REFERENCE, SEE TABLE OF COUNTRY MARKET SPREADS AND RATINGS ON NEXT PAGE).
Creditor committees formed to work on a debt restructuring in early 2014 and the World Bank was also asked by the Metalastan government for some assistance. Final details were just released this week to settle the outstanding bond claims.
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