Ukrenergo reaches debt management agreement with holders of 45% of $825 mln Eurobonds

MOSCOW. April 29 (Interfax) - Ukrenergo has agreed on terms for managing the debt on state-guaranteed green sustainable development bonds, which are worth $825 million, have a 6.875% annual rate and mature in 2028, with an Ad Hoc Group of holders of 40% of such bonds and bondholders unaffiliated to the group that control over 45% of the bonds in total, Ukrainian media said, citing the state-run company's website.

The debt management transaction due to be finalized in early July 2025 will invite bondholders to participate in a buyback offer and/or an exchange offer for new Ukrenergo debt securities.

"The buyback option involved raising $430 million on international capital markets through financing guaranteed by a development finance institution, which the company will use to finance the buyback of bonds through an unmodified reverse Dutch auction with a maximum price of 65.125% of face value plus accrued and overdue interest on the closing date," the company said.

Ukrenergo Eurobonds fell by 3.47% on the Frankfurt Stock Exchange on Monday, to 68.81%.

If the demand exceeds the available limit, bonds tendered at the maximum price will be accepted on a pro rata basis, the company said. Any bonds offered but not accepted for buyback will be included in the exchange offer.

Under the exchange option, bondholders will be invited to swap their bonds for new unsecured Ukrenergo bonds maturing in 2031. These new instruments will carry an annual coupon rate of 8.5%, with semiannual repayments beginning in June 2028. The repayment schedule includes 10% of the principal in each of the first four installments from June 2028 to December 2029 and 15% in each of the last four from June 2030 to December 2031.

Bondholders who agree to the voluntary exchange will be eligible to convert their holdings at a 1:1 ratio, factoring in accrued and overdue interest. However, bonds not voluntarily tendered for buyback or exchange may be subject to a 20% discount if exchanged later within the scope of available funds after the buyback.

If the total volume of tenders in the buyback option falls short of the $430 million limit, the remaining funds will first be used for a pro-rata buyback of bonds that were not voluntarily tendered for buyback or exchange, at 60% of face value. Any leftover funds will then be used to buy back bonds from voluntary exchange participants at a price equal to the lower of: a) 68.7% of the nominal value plus accrued and overdue interest as of the closing date; or b) the price that ensures Ukrenergo's weighted average total repurchase cost remains at 67.125%, accounting for both voluntarily and involuntarily tendered bonds.

Additionally, every bondholder who participates in either the buyback or exchange is deemed to have voted in favor of a consent solicitation regarding certain proposed amendments to the bond terms and the state guarantee. Completion of the consent solicitation is a prerequisite for securing the development finance institution's guaranteed funding required for the buyback, Ukrenergo said.

"Therefore, neither the buyback nor the exchange offer will proceed unless the proposed amendments under the consent solicitation receive the required level of bondholder approval," Ukrenergo said.

According to the company, the quorum at the meeting is two-thirds of the amount of bonds in circulation, while the vote passes if supported by 75% of the meeting participants.

Incentives include a 2% nominal value premium if the full $430 million is tendered for buyback and 10% if a lower volume of bids is received or in the case of a bond exchange.

Acting Ukrenergo CEO Alexei Brekht urged all bondholders to support the upcoming debt management transaction, as the bond restructuring will allow the company to prioritize critical reconstruction and recovery efforts aimed at higher resilience and reliability of Ukraine's energy system.

According to Richard Deitz, president of VR Capital Group, a member of the Ad Hoc Group, the terms reached strike a balance between the legitimate commercial expectations of bondholders and Ukrenergo's need for investment to provide continuous provision of critical services throughout Ukraine.

These terms stem from lengthy good-faith negotiations between Ukrenergo and the Ad Hoc Group, which is confident that the agreed parameters guarantee broad support from bondholders and looks forward to the success of the consent solicitation, Deitz said.

The company also said that White & Case LLP and Rothschild & Co acted as advisors to Ukrenergo, and Cleary Gottlieb Steen & Hamilton LLP acted as advisors to the Ad Hoc Group.