28 Jul 2023 16:54

Naftogaz Eurobond holders consent to restructuring

MOSCOW. July 28 (Interfax) - Ukraine's Naftogaz on Friday obtained the consent of investors to restructure its Eurobonds maturing in July 2022 and November 2026, Ukrainian media quoted the company as saying in a stock exchange filing.

Meetings of bondholders were quorate, with 100% of the 87.72% of 2022 bondholders present and 99.72% of the 91.33% of 2026 bondholders present voting in favor of the restructuring.

"Thus, the extraordinary resolutions for the 2022 and 2026 bonds have been passed," the company said.

"This will allow the company to normalize the situation on the capital markets and work more closely, in particular, with international financial institutions that could not provide support before the adoption such a decision," Naftogaz CEO Alexei Chernyshov was quoted as saying.

He said that Naftogaz remained committed to servicing its debt and fulfilling its obligations, including on corporate governance reform, as well as investment plans, despite extremely difficult circumstances.

Naftogaz at the beginning of March published updated proposals to restructure the bonds on which it had defaulted the previous summer. Most of the changes concerned the 2022 bonds.

Bondholders whose support was considered necessary to approve the company's restructuring objected to the February proposals as it believed the company was capable of making payments, Bloomberg reported.

Naftogaz said at the end of May that it had reached agreements with investors to restructure two defaulted issues of Eurobonds by the end of July. The company agreed to somewhat improve the terms of the restructuring compared to those it proposed on March 10.

Naftogaz on July 13 announced the start of voting to secure investors' consent to restructure the two Eurobonds issues, one totaling $375 million with maturity in July 2022 and the other totaling $500 and maturing in November 2026. The company hoped the vote would conclude by the end of July.

Under the terms published on the exchange, the main changes are somewhat stricter covenants, payment of the last semiannual coupon in cash within the two-year deferment period, the creation of a fund for interest payments on the 2026 bonds and the introduction of a payment for restructuring.

As before, Naftogaz proposed to defer payment of 50% of the principal debt on the 2022 Eurobonds by two years to July 19, 2024 and defer payment of the other 50% to July 19, 2025. For the 2026 Eurobonds, the company still proposed to pay down 50% of the principle on November 8, 2027 and 50% on November 8, 2028, as well as pay 0.5% of the principal for consent.

As in March, Naftogaz proposed to raise the interest rate on the 2022 Eurobonds from 7.375% to 7.65%, the same rate as on the 2026 Eurobonds, from the date of the approval of the consent solicitation, and to pay down 5% of the principal along with overdue interest.

Naftogaz still wanted to retain the right to repay or capitalize overdue interest fully or in part at any time before the end of the respective interest deferral periods, with the exception of the last coupon, which was to be paid in cash: from January 19 to July 19, 2024 for the 2022 Eurobonds and from May 8 to November 8, 2024 for the 2026 bonds.

One of the new proposals is to create a fund to accumulate money for interest payments on the 2026 bonds: the amount of one coupon totaling $19.06 million or the equivalent in hryvnia on the day the restructuring goes into effect, and then $3 million on both January 15 and February 15 and another $13.06 million on March 31, 2024.

The company said such covenants would also benefit the holders of its 600 million euros Eurobond issue maturing in 2024, who were the only ones to agree to defer payments for two years last year.