Ukraine’s Naftogaz sweetens deal for bondholders seeking debt relief

The logo of Ukrainian state energy company Naftogaz is seen outside the company’s headquarters in central Kyiv, Ukraine October 18, 2021. REUTERS/Gleb Garanich

NEW YORK, Aug 3 (Reuters) – Ukraine’s state-owned gas company Naftogaz has outlined a new plan to freeze debt payments, a week after it became the first government entity to default since the Russian invasion began in late february.

The energy company’s finances have been under pressure since the start of the war as many of its customers have been unable to pay their bills. Read more

Naftogaz’s proposal, announced on Tuesday, includes a two-year payment freeze and a two-year deferral on the maturities of the notes, which are due to expire in 2022, 2024 and 2026.

The Notes would earn additional interest while deferred interest would continue to accrue at the rates set for each Note.

The proposal was sent to holders of the $335 million 7.375% notes due 2022; the 600 million euro notes at 7.125% due 2024; and the $500 million 7.625% notes due 2026.

Naftogaz’s initial proposal, sent a week before the July 19 deadline of the 2022 note, was rejected by bondholders, who said they did not recognize the company would have a cash crunch. Read more

The consent solicitation was initiated “in light of the protracted circumstances affecting Ukraine following the ongoing large-scale military invasion”, according to the document, and is intended to “facilitate the preservation of available liquidity by (Naftogaz ) to support Ukraine’s strategic priorities”. “

The Ukrainian government on Monday evening gave Naftogaz the green light to agree new terms for restructuring its international obligations.

In a statement on Tuesday evening, Naftogaz confirmed that the finance ministry had coordinated with it on the plan.

“The terms of the proposal are consistent with the terms of the proposal to investors to defer payments of Ukraine’s sovereign Eurobonds and the proposals to investors of Ukrenergo and Ukravtodor,” Naftogaz said in the statement.

Ukraine’s government, which faces an acute cash crunch and a budget deficit of $5 billion a month, has asked holders of some $20 billion of international bonds to defer payments for at least two years. . Ukravtodor, the state road agency, and state-owned Ukrenergy have launched similar proposals.

Naftogaz holders have until August 12 to vote on the proposal, the document says, with a meeting scheduled for August 17 at 11 a.m. London time (1000 GMT).

For the proposal to be accepted, a quorum of two-thirds of the total nominal value of the Eurobonds was needed while 75% of the participants in the meeting must vote in favor, Naftogaz said in its statement.

The consent solicitation was made by Naftogaz through its financial arm, Kondor Finance, the issuer of the Notes. Failure to pay the 2022 bond may trigger an acceleration of payments on the other notes, but does not trigger a sovereign cross default.

Naftogaz is a major source of revenue for Ukraine, accounting for nearly 17% of total state budget revenue last year and employing more than 50,000 people before the war.

Reporting by Rodrigo Campos; additional reporting by Ania Pruchnika and Karin Strohecker, editing by Jorgelina do Rosario, Bill Berkrot, Leslie Adler and Jane Merriman

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