2 Sep 2009 18:01

Naftogaz in talks to restructure $1.6 bln in debt

KYIV. Sept 2 (Interfax) - Naftogaz of Ukraine has begun talks on restructuring about $1.6 billion in debt owed to foreign banks, the national oil and gas company said in its consolidated financial statement for 2008.

"The group is seeking an extension to the repayment period and improvements to other key terms of the loans," the statement says.

Naftogaz management is hopeful a debt restructuring deal can be reached before year-end.

"However, at the time of publication of the consolidated financial statement, the final outcome of the debt restructuring process remains unclear," according to the statement, which was completed on August 28.

It was reported earlier that the Ukrainian Finance Ministry expects 75% of the holders of Naftogaz Eurobonds will agree to the rescheduling terms that have been put on the table. "I'm confident that at least 75% [of the investors] will agree to our debt rescheduling terms," Ihor Umansky, the acting finance minister, told reporters.

The government and Finance Ministry ordered Naftogaz on July 22 to take action to reschedule its foreign debt and refinance loans to bring servicing costs down.

Naftogaz is due to pay $1.78 billion in foreign loans in 2009-2012, including $650 million this year and $570 million in 2010, and has been holding preliminary talks with creditors as a first step to rescheduling its debt effectively.

Naftogaz said in a press release that it had hired Credit Suisse as dealer-manager in the planned restructuring of the $500 million Eurobond which matures September 30, 2009 and the bilateral loan obligations of the company.

"Naftogaz considers that in the light of tough market conditions and structural difficulties in the domestic and international gas market, the extension of the maturity of the Eurobond is one of a number of measures the company is considering to best manage its financial situation," the company said in a press release.

"The appointment of Credit Suisse further demonstrates that the company is striving to restructure its debt in a transparent way that is both appropriate and fair to the company and its creditors," it said.

"Further details as to the restructuring will be announced in the near term," it said.

HeadLand Consultancy has already been hired as an international advisor to Naftogaz.

Interfax understands that 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.

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. A representative of that group predicts that other investors may join the group and that they will be able to veto the restructuring if more than 25% of bond-holders dissent.