DTEK Energy announces buyback of up to $50 mln in Eurobonds, seeks easing of covenants
MOSCOW. Sept 14 (Interfax) - DTEK Holdings Limited is prepared to buy back up to $50 million of DTEK Energy Eurobonds due in 2027 in a Dutch auction and has asked bondholders to reconsider covenants in order to provide more possibilities for investment and repairs.
In the current conditions it would be economically beneficial for both bondholders and the group's overall financial results to carry out additional payments through the mechanism of an unmodified Dutch auction, Ukrainian media reported, quoting a DTEK Holdings Limited stock exchange filing.
Under this mechanism, the fee for the buyback will be 0.75% of the bonds' face value. Bids will be accepted until the evening of September 26, the results will be announced on September 27 and settlements are scheduled for October 17. The company said it retains the right to change the maximum amount of the buyback.
As regards the changes to the covenants, the company noted that developing energy storage systems is important for Ukraine's energy market and that it wants to invest in this sector, but this is restricted by the current terms of the bonds.
The group has strong potential to use existing capacity and resources to offer services to develop and maintain battery energy storage systems to affiliated and third parties on commercially reasonable terms, the company said.
Furthermore, the company said it needs to repair and replace damaged or obsolete equipment, which requires substantial capital expenditures.
Another reason for revising the covenants is the replacement of the original issuer of the bonds, DTEK Finance plc with parent company DTEK Energy B.V. at the end of November 2022, as existing restrictions could interfere with the company's normal business activities, the statement said.
DTEK previously announced a similar auction in March 2023, initially for up to $30 million but the amount was later raised to $80 million. As a result, the company bought back bonds for the whole amount with face value of $181 million at a price of about 41.33% of face value.
Prior to this, in December 2022 the company bought back Eurobonds for $19.8 million out of a maximum announced amount of $50 million at a maximum price of 27% of face value.
DTEK said it now has a total of about $1.487 billion in bonds outstanding, but bonds totaling $271.23 million are held by the group.
The company said earlier that repurchasing Eurobonds would reduce its debt burden and enable it to invest money saved on debt servicing in its current operations, including restoration of damaged equipment, power plant repairs, coal mining and preparations for the upcoming heating season.
DTEK Energy reported a net profit of UAH6.23 billion for the first half of 2023 compared to a net loss of UAH1.41 billion in the same period of 2022, although revenue slumped 6.5% to UAH29.9 billion.
The company's free cash flow rose to UAH2.83 billion at the end of June from UAH2.01 billion at the start of 2023 and UAH2.763 billion in mid-2022.
The official exchange rate was UAH36.57/$1 on September 13.