Naftogaz offers to discuss slightly better restructuring terms with holders of defaulted Eurobonds
MOSCOW. Feb 10 (Interfax) - Naftogaz Ukraine has offered to discuss slightly better restructuring terms with holders of Eurobonds with maturity in 2022 and 2026 on which it defaulted last summer.
Naftogaz is prepared to pay the coupon that was due on July 19, 2022 on the 2022 Eurobonds and interest accrued on it on about April 15, and on the 2026 Eurobonds it is prepared to pay a consent fee of 0.5% and pay down the principle in equal portions in November 2027 and November 2028 rather than 100% in November 2028 as previously proposed, Ukrainian media reported, citing a statement issued by the state oil and gas company.
The company also proposed to amend the debt incurrence covenant until the end of the interest deferral period.
Terms and proposals that might be acceptable to both parties, to investors and to the group of companies, are being discussed, Naftogaz CEO Alexei Chernyshev said on the company's Telegram channel, commenting on the new restructuring option.
The new terms were worked out with the participation of financial advisor Lazard Frères SAS and legal advisor Freshfields Bruckhaus Deringer.
"Naftogaz has prepared this working scenario in response to feedback received from certain of its creditors. Naftogaz, working closely with its advisers and stakeholders, including the government of Ukraine, will provide further updates in due course," the company said in the statement.
In July 2022, Naftogaz proposed to the holders of its three Eurobond issues to defer coupon payments on them by two years. The first attempt to gain bondholders' approval failed, and in the second attempt, in late August, the company only secured agreement from holders of the Eurobonds maturing in 2024. The quorum in the vote on the 2024 bonds was 56.61% and 77.24% of votes were cast in favour of the deferral, largely thanks to the European Bank for Reconstruction and Development being among the bondholders.
Naftogaz said at the time that it could now pay the principle of the debt on this issue, 600 million euros, in 2026 instead of 2024, but that it would start paying interest on the bonds in 2024. The amount of interest deferred to 2024 will total 90 million euros (45 million euros per year that are supposed to be paid in July of each year).
The quorum in the vote on the 2026 Eurobonds was 54.24%, but only 43.13% of votes were cast in favour of the proposal, while the quorum for the 2022 Eurobonds exceeded two thirds but only 22% of bondholders voted for the deferral.
Naftogaz said the proposal to defer payments was necessitated by a government decision to accumulate additional reserves of natural gas for the upcoming heating season, which required about $8 billion.
All three of Naftogaz's outstanding Eurobond issues were placed in 2019. They include 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, 2022.
After the replacement of Naftogaz's CEO in November 2022, the company said it had reached out to bondholders with a proposal to step up cooperation to find a mutually acceptable solution.