29 Feb 2024 14:27

Interpipe says unable to honor financial obligations to creditors if NBU turns down request to pay coupons on Eurobonds

MOSCOW. Feb 29 (Interfax) - Ukraine's Interpipe industrial group will be unable to honor obligations to creditors if the National Bank of Ukraine turns down a request for purchasing foreign currency to pay coupons on bonds placed in the West, Ukrainian media reported, citing a company document.

The conditions for financial market participants in Ukraine are now unequal, according to the company's official position, sent to Ukrainian media at their request. State-owned companies can service external debts, while private companies are significantly constrained.

"Interpipe has external financial obligations that arose due to the construction of an innovative electric steel plant and modernization of pipe and wheel production. The company raised funds from foreign investors in the Ukrainian enterprises, but Interpipe is unable to honor its financial obligations because of the NBU resolution dated February 24, 2022," the document says.

Interpipe said that since February 2022 it had taken all possible measures to ensure stable financial activity and settlements with creditors, but had now exhausted internal reserves to service its loan obligations and is on the brink of default due to restrictions imposed by NBU (in the event it had sufficient financial resources of its own and its own foreign currency).

The company has asked the government for permission to purchase currency and carry out cross-border currency settlements together with four Interpipe group enterprises. The government analyzed the requests and, in view of the critical nature of the situation, asked the NBU to issue individual permits for settlements on external obligations to five major large Ukrainian companies, including Interpipe.

The regulator's consent would not affect the foreign exchange balance in any way "because the company has its own foreign exchange resources and will not convert it into hryvnia due to the risk of devaluation. Obtaining permits will of course also affect the volume of direct investment in the country. And a negative decision could lead to the default by large Ukrainian companies that guarantee tax payments, foreign exchange earnings and thousands of jobs," according the group's official position.

"The approval of individual permits and the acceleration of currency liberalization measures will improve the investment climate and the economy's stability," it said.

The Ukrainian government adopted resolutions on February 6 and 13 to approve requests to the National Bank that VF Ukraine, DTEK, Metinvest, Interpipe and Kernel be allowed to make payments to Eurobond holders and other foreign creditors from Ukraine. Supporting documents said such decisions would help maintain investor confidence, save foreign currency for the companies, many of which are major exporters, and ensure their more efficient and stable operation in the future. Experts estimate the total sum mentioned in the requests at over $1.8 billion.

The head of the IMF mission to Ukraine, Gavin Gray, sent a letter to the Ukrainian authorities, which said he doubted such an individual approach complied with the strategy for liberalization of forex restrictions approved by the National Bank last summer in fulfillment of obligations under the Extended Fund Facility (EFF). The IMF is also concerned about the rather significant amount of possible payments and the possible impact of such decisions on Ukraine's upcoming negotiations on the restructuring of sovereign Eurobonds with commercial creditors.

The National Bank of Ukraine has so far refrained from comment.

Interpipe is a Ukrainian industrial group that manufactures seamless pipes and railway wheels. The company exports its products to over 80 countries through a network of sales offices in major markets of the Middle East, North America and Europe.

Interpipe has 10,000 employees. It paid UAH 4.4 billion into budgets at all levels in 2023.

Interpipe has five manufacturing divisions: Interpipe NTRP, Interpipe Novomoskovsk Pipe Plant, Interpipe Niko Tube, Interpipe Vtormet and electric furnace steel plant Dneprostal (Interpipe Steel).

Interpipe Limited's ultimate beneficiaries are Ukrainian businessman Viktor Pinchuk and members of his family. Pinchuk is son-in-law of Leonid Kuchma, a former Ukrainian president.