Naftogaz head negotiating with Eurobond holders, hopes for progress in January
MOSCOW. Dec 26 (Interfax) - Alexei Chernyshov, CEO of Naftogaz of Ukraine, on December 22 discussed primary objectives with the holders of its Eurobonds maturing in 2022 and 2026, on which the company defaulted after failing to have its obligations on them restructured this past summer.
"In particular, we talked about joint actions to restructure the obligations owed by the group of companies," Ukrainian media have quoted Chernyshov as saying on his social account on Friday.
"We hope to make substantial progress in negotiations with the bondholders in January," which should improve international partners' confidence in Naftogaz and enable it to raise funds to address principal problems and pursue development projects, he said.
Naftogaz is being assisted in coordinating the negotiating process by Lazard Freres SAS as its financial advisor and Freshfields Bruckhaus Deringer as its legal advisor, Chernyshov said.
As reported, the holders of Naftogaz's 2024 Eurobond issue approved a second proposal on deferring payments on them at the end of August. The quorum on the 2024 issue was 56.61% of the total number of participants. The company's proposal was supported by 77.2% of the votes, owing to a large degree to the fact that the holders included the European Bank for Reconstruction and Development (EBRD).
Naftogaz can now repay the principal of the debt in the amount of 600 million euros in 2026 rather than in 2024, and begin paying interest on it in 2024. The interest deferred in 2022-2024 will total 90 million euros (45 million euros to be paid in July of each year).
The quorum on the 2026 issue was 54.24%, but only 43.13% of the votes were cast in favor of deferring payments on the 2026 Eurobonds, and, with the quorum of over two-thirds on the 2022 issue, only around 22% voted in favor of a deferment.
In proposing that payments on the Eurobonds be deferred, Naftogaz argued that it required about $8 billion to comply with the government's decision to accumulate extra amounts of natural gas for the upcoming heating season.
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 deadline for the redemption of the 2022 bonds and interest payments on them and the 2024 bonds was July 19.
After a new Naftogaz CEO was appointed in November, the company invited the Eurobond holders to intensify cooperation to find a mutually acceptable solution. It also appointed Lazard Freres SAS as exclusive financial advisor to coordinate the negotiation process together with AEQUO and Freshfields Bruckhaus Deringer as its legal advisors.
The Ukrainian government on November 8 gave Naftogaz two weeks to inform it of key terms on which the loan contracts dated July 17, 2019 and November 6, 2019 would be amended to fulfill the restructuring deal.