21 Sep 2009 17:44

Ukraine to provide state guarantees in Naftogaz debt restructuring

KYIV. Sept 21 (Interfax) - The Ukrainian Cabinet has authorized the Finance Ministry to provide guarantees as part of Naftogaz Ukrainy's debt restructuring.

"The guarantee may be presented immediately after Naftogaz reaches agreement with creditors on the terms of the restructuring," the Finance Ministry said in a press release.

The guarantees will be provided in line with provisions in the 2009 state budget.

The restructured debt to which the guarantee applies should be for approximately five years in order to optimally manage Ukraine's external debt.

"The ministry supports Naftogaz as regards the need to extend the term for Eurobond payments and to reach an agreement on bilateral debt. We approve of the desire to find a resolution that is acceptable and fair for all parties, and we believe that Naftogaz will achieve this goal with sovereign guarantees," First Deputy Finance Minister Ihor Umansky said.

"But I should stress nevertheless that Naftogaz itself is responsible for the negotiations and for announcing the restructuring terms since the restructured debt belongs to Naftogaz and not to the Ukrainian government," he said.

Umansky also said the Justice Ministry has clarified that the state guarantees apply to the principle debt as well as interest paid to creditors.

Naftogaz should announce the restructuring terms in the near future, the press release says. The terms will be acceptable for both the company and for its creditors, Umansky said.

It was reported earlier that Naftogaz planned to conduct a series of negotiations with creditors beginning September 14 on restructuring its debt, including Eurobonds that mature on September 30, 2009.

Naftogaz reported earlier that it had already begun talks on restructuring $1.6 billion in foreign debt.

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.

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.