27 Jul 2022 10:36

Naftogaz to immediately propose new agreement for Eurobond holders' consent to defer payments

MOSCOW. July 27 (Interfax) - Naftogaz Ukraine, which has defaulted on two of its three outstanding Eurobond issues, will immediately propose a deferred payments agreement to bondholders in compliance with the conditions specified by the Ukrainian government in an order dated July 21, 2022, Ukrainian media outlets quoted the company as saying in a statement.

"This process should be a part of joint actions by the government and other state-owned companies to propose similar terms for deferred payments on Eurobonds," Naftogaz said.

"Naftogaz is working with all stakeholders to obtain the consent of the Eurobond holders," the company added.

Naftogaz Ukraine defaulted on its Eurobonds on Tuesday due to the government's refusal to approve payments on them. "The deadline for payments to holders of Naftogaz Eurobonds expired on July 26 without payment taking place," the company said.

The company recalled that Ukraine's Cabinet, acting in the temporary capacity of a Naftogaz general meeting of shareholders, had on July 21 issued an order obliging Naftogaz officials to seek cabinet approval before executing any transactions related to the company's Eurobonds.

"In its official letter to the government, Naftogaz indicated the availability of the necessary funds in its accounts to cover Eurobond payments. Naftogaz officials also detailed the possible negative consequences for the company and for the country in the event of a hard default on Eurobond payments," the company said.

But the Cabinet "failed to provide permission for Naftogaz to fulfill its payment obligations to Eurobond holders for either the 2022 issue or the 2024 issue," the company said, adding the "government has therefore defaulted on Naftogaz Eurobond payments."

"As this failure to meet its Eurobond obligations effectively deprives Naftogaz of access to international capital markets, the Cabinet of Ministers as the responsible party now assumes full responsibility for raising the funds necessary for the import of natural gas for the 2022-2023 heating season," the company said.

There are currently three outstanding Naftogaz Eurobond issues, all of which were placed in 2019, including a three-year issue of $335 million placed at 7.375% in July that year, a five-year issue of 600 million euros placed at 7.125% in July (with the EBRD buying up a fifth), and a seven-year issue of $500 million placed at 7.625% in November. The $335 million issue matured on July 19, 2022, when the company was also due to pay interest on these bonds and the bonds maturing in 2024. The grace period for the payments ended July 26.

Naftogaz had proposed to pay all coupons on the 2022 and 2024 bonds on July 19, 2024 and to redeem the 2022 bonds the same day. The company wanted to pay the coupons on the 2026 bonds on November 8, 2024.