Naftogaz could restructure external debt payments
MOSCOW. July 23 (Interfax) - Ukraine's Naftogaz is thinking of restructuring debt payments due in 2026 and consisting mainly of payments on Eurobonds, Ukrainian media quoted Naftogaz CEO Alexei Chernyshov as saying on a conference call with investors organized by Dragon Capital on Monday.
One of the call participants told the media that Chernyshov said the company would be capable of making all payments on outstanding debt due in 2025. The participant said that according to the data presented at the conference call, Naftogaz would have to pay about $277 million in 2025 and about $855 million in 2026.
Naftogaz made mandatory payments on Eurobonds in keeping with the restructuring schedule on July 19, with the next ones planned for November 2024.
According to Frankfurt Stock Exchange data, Naftogaz 7.625% notes worth $500 million maturing on November 8, 2026 were quoted at 77.02% on Monday, up 0.6%, with the 7.125% notes worth 694.6 million euros due July 19, 2026 unchanged at 81.5% and $150.75 million 7.375% notes maturing July 19, 2025 quoted at 92.35%.
Naftogaz initiated the restructuring of Eurobonds following initiatives by the Ukrainian government in July 2022, ahead of their maturity date. Bond holders did not consent and the bonds defaulted on July 19, 2022, as the company did not pay principal or interest. However, at the end of August 2022, Naftogaz agreed on the restructuring of euro-denominated notes and 45 million euros of accrued interest, extending maturity by two years.
Then, on November 8, 2022, the company defaulted on interest payments on another $500 million Eurobond issue due in 2026, offered to extend maturity by two years and brought in financial advisers to restructure it.
Naftogaz said at the end of May 2023 that agreements had been reached with investors, who consented to some improvement in terms for holders of two default issues and payment, along with overdue interest, of 5% of the principal amount of the debt. The main changes were a tightening of covenants, payment of the last semi-annual coupon in cash, the creation of an interest payment fund for the 2026 bonds, as well as the emergence of a restructuring fee, although no details about it were given.
As previously, Naftogaz proposed to defer payment of 50% of principal debt by two years until July 19, 2024, and the remaining 50% until July 19, 2025. Regarding the deferment of principal on the $500 million notes, that proposal was also unchanged at 50% by a year until November 8, 2027, and the other 50% until November 8, 2028, as well as payment of a consent fee of 0.5% of principal.
The restructuring proposal envisaged an increase in yield payable on the 2024 notes from 7.375% to 7.65% per annum from the date the restructuring takes effect, while yield on the 2028 notes was 7.625%.
Naftogaz decided to reserve the right to decide independently whether to pay interest for the two-year deferment period or to capitalize it, with the exception of the last coupon: for the 2024 notes from January 19 to July 19, 2024, and for the 2028 notes from May 8 to November 8, 2024.
Also new was the proposal to create a fund to pay interest on the 2026 notes: one coupon is $19.06 million or the equivalent in hryvnia on the day the restructuring takes effect, then $3 million on January 15 and February 15, 2024 and another $13.06 million on March 31, 2024.
The government approved the terms in June 2023, and Eurobond holders finally gave their backing to the restructuring at the end of July that year. Naftogaz completed work on debt restructuring during September 2023 for all Eurobond issues and made all agreed payments to Eurobond holders.
The company reported that as of the middle of April 2024 it had accumulated $38.1 million in a special account to secure payment of interest on the 2028 Eurobonds totaling $500 million.
The Fitch ratings agency said in December 2023 that following completion of the Eurobond restructuring process, the first two significant payments must be made in July 2024 and July 2025 - about $165.5 million each.
Naftogaz swung to consolidated net profit of UAH 10.9 billion in Q1 2024 from UAH 1.9 billion a year previously. Revenue grew 33.8% to UAH 85.14 billion.