Moody's Investors Service has said that it will likely view the proposed exchange offer of Metinvest B.V. (Caa2 negative) for its $500 million 10.25% notes maturing in May 2015 as distressed exchange on execution of the exchange offer, which would be considered a default as per Moody's definitions.

"The exchange offer has no immediate impact on the company's Caa2 corporate family rating (CFR), Caa2-PD probability of default rating (PDR), or negative outlook. However, the rating agency would likely lower Metinvest's PDR to LD-PD to reflect the limited default upon completion of the exchange offer," reads the report, a copy of which has been sent to Interfax-Ukraine.

As reported, Metinvest mining and metal holding has proposed that the holders of its $500 million guaranteed notes due on May 20, 2015 receive 20% of the principal of the debt on May 20 and the rest of the notes are exchanged to new guaranteed notes due ton November 24, 2017.

The coupon rate will be increased from 10.25% to 10.50% per annum, and the note holders who agree to exchange the notes before October 31 will receive a bonus of 1%.

Deutsche Bank AG, London Branch and ING Bank N.V., London Branch are acting as dealer managers and The Bank of New York Mellon, London Branch is acting as exchange agent.

The exchange offer is made on the terms and subject to the conditions set out in the exchange offer Memorandum dated 21 October 2014 and will expire on November 18, 2014.

The minimum participation condition is $450 million.