7 Mar 2023 16:43

Naftogaz to present updated proposals March 10 to restructure its 'in default' Eurobonds

MOSCOW. March 7 (Interfax) - Ukraine's Naftogaz on March 10 will present a plan for exiting default on its Eurobonds with repayments to holders of these obligations in 2022 and 2026, and will hold a conference call with them together with Yuri Butza, authorized Ukraine government representative for state debt management, Ukrainian media reported, quoting a company stock exchange filing.

"During this call, Naftogaz Chairman of the Executive Board Aleksey Chernyshov, with Supervisory Board head Anthony Marino and Butza will provide creditors with general updated information about the situation with Naftogaz (...) and, in response to the feedback they receive, will present a plan for resolving the situation with the default," the company said in the message.

In turn, Chernyshov indicated Tuesday on social networks that during the online meeting, proposals will be presented on the restructuring of the Eurobond obligations which were put together with financial adviser Lazard after preliminary discussions with investors.

"They must find a solution that will satisfy all the participants in the process: both investors and our group of companies," the head of Naftogaz said.

As reported, on February 9, Naftogaz proposed to holders of Eurobonds with repayments in 2022 and 2026, which it allowed to default last summer after unsuccessful attempts to restructure them, to discuss slightly better conditions. The company was ready to pay on approximately April 15, 2022 the overdue July 19, 2022 coupon on Eurobonds-2022 and the interest accrued, and on Eurobonds-2026, to pay a 0.5% commission for the exchange and repay the principal amount in equal installments in November 2027 and November 2028, and not 100% in November 2028 as previously suggested.

At the same time, a group of Naftogaz Eurobond holders, whose support is considered necessary to approve the company's restructuring, objected to the proposed restructuring plan, as it believed the company is capable of making payments, Bloomberg reported.

Naftogaz in July 2022 invited holders of three of its Eurobond issues to postpone the payments of coupons for them and repay them for two years. The first attempt failed, and on the second attempt, the company at the end of August only received consent from the holders of Eurobonds-2024. Then, the proposal for postponement was supported by 77.24% of the vote, largely due to the European Bank for Reconstruction and Development (EBRD) being among the Eurobond-2024 holders.

As far as the 2026 bond release is concerned, there was a quorum at the bondholders meeting, but only 43.1% of the vote was cast in support of the proposal, and only about 22% of the vote was cast in favor of deferring payments on the 2022 release.

Naftogaz argued that the proposal to postpone payments was due to the need to accumulate additional natural gas reserves for the current heating season, which would require about $8 billion.

All three Naftogaz Eurobond issues were posted in 2019: in July, three-year bonds for $335 million at 7.375% and five-year bonds for 600 million euros at 7.125%, with 20% of the euro-denominated bonds bought by the EBRD. In November, seven-year bonds were issued for $500 million with a yield of 7.625%. The deadline for the repayment of Eurobonds-2022 with interest and Eurobonds-2024 was July 19 of last year.

After the appointment of the new Chairman of the Naftogaz Executive Board in November 2022, the company reported it had addressed the owners of the Eurobonds with a proposal to notch up interaction and search for a mutually acceptable solution. They also brought in Lazard Freres SAS and Freshfields Bruckhaus Deringer as outside advisers.