22 Sep 2009 14:16

Ukrainian govt okays proposals to restructure Naftogaz foreign debt

KYIV. Sept 22 (Interfax) - The Ukrainian government has agreed to proposals on how to restructure Naftogaz Ukrainy's debts on its foreign liabilities that have been submitted by the Finance Ministry and the national energy company itself.

A Cabinet resolution on the proposals dated September 16 was published in the Uryadoviy Kurier governmental newspaper on Tuesday.

The newspaper, however, did not disclose the restructuring terms approved by the government's resolution.

Debt restructuring negotiations with creditors are expected to finish before October 20, according to the newspaper.

"Naftogaz Ukrainy and the Finance Ministry have until October 20, 2009 to agree upon the main terms for restructuring the company's debts on foreign liabilities, including with investors on Eurobonds that were issued to fund the company's $500-million debt due to mature on September 30, 2009, as well as with creditors on bilateral loans. Measures must be taken to ensure the company's implementation of the aforementioned terms," the Cabinet resolution says.

According to the resolution, the government agreed to provide Naftogaz with $2.006 billion in state guarantees on foreign debt. The company's liabilities on loan agreements with foreign creditors will then be replaced by liabilities on securities.

Naftogaz's press service told Interfax that the proposed restructuring terms will be announced in the very near future.

The $1.6 billion in debt that Naftogaz is seeking to restructure includes $220 million owed to Depha Bank, $550 million owed to Credit Suisse International (CSI), and $395.2 million owed to Deutsche Bank, which are due to be repaid in 2009-2012. Taking into account the Eurobonds and interest, the overall sum due to be paid is about $1.78 billion, including about $650 million due in 2009 and about $570 million in 2010.

Cyprus-registered Squire Capital is one of Naftogaz's consultants for the restructuring. At the end of August Naftogaz announced it had hired HeadLand Consultancy as international consultant for the restructuring and in early September it reported that Credit Suisse would be the advisor and dealer-manager.

At the same time, a group of holders of Naftogaz Eurobonds worth about $100 million, or 20% of the overall bond issue, say they disagree with the possible restructuring. The group said Naftogaz has already missed the deadline for submitting proposals on restructuring under which it could have avoided a default on the Eurobonds on September 30 and also predicted that the restructuring of Naftogaz's debt is highly unlikely without government guarantees. Naftogaz must get approval from more than 75% of the bondholders to restructure the debt.

Naftogaz Ukrainy includes Ukraine's biggest oil and gas production enterprises and is the monopoly for transit and storage of natural gas and for oil transportation on Ukraine's pipeline network.

The 2009 budget contains an article on up to $2.006 billion in state guarantees for Naftogaz's foreign debt incurred before January 1, 2009 if the company is unable to repay the debt.