3 Aug 2022 09:55

Ukrainian govt approves new Naftogaz proposal for deferring payments on Eurobonds

MOSCOW. Aug 3 (Interfax) - Naftogaz Ukraine will in the next few days send investors in its Eurobonds a new proposal to postpone payments on the bonds, as it has received the necessary approval from the Ukrainian government, the state oil and gas company said.

"Ukraine's Ministry of Finance confirmed that the new proposal to Naftogaz Eurobond holders to postpone payments has been coordinated with the Ministry of Finance and that the conditions of the proposal comply with the conditions of the proposal to the investors to postpone payments for sovereign Eurobonds of Ukraine and proposals to investors from Ukrenergo and Ukravtodor," Naftogaz said in a press release.

The company said that the Ukrainian government expects Naftogaz Eurobond holders to support the proposed conditions for postponing payment. This will enable Naftogaz to use the accumulated funds for natural gas imports and to prepare for the heating season, "which could be the most difficult in modern Ukrainian history," the company said.

"In order to be granted consent from the Eurobond holders at the first meeting, the quorum should consist of 2/3 of the total face value of Eurobonds, and 75% of the meeting participants should cast their votes in favour," Naftogaz CEO Yuriy Vitrenko said in the press release.

The Ukrainian Cabinet decided on July 21 that the Naftogaz board's work with the issuer of its Eurobonds, Kondor Finance plc, to change the terms of the securities was unsatisfactory and told the company to conclude a new contract with Kondor Finance on terms set by the government. The terms themselves were not indicated in the directive.

Naftogaz had initially 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. However, bondholders rejected this proposal, while the government prohibited payment, leading the company to default on two of the three bond issues on July 26.

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.