Ukraine's largest oil and gas company, Naftogaz, has offered holders of its Eurobonds to postpone payments for two years, as the company risks facing problems in paying debts during the war. This was reported by Interfax with reference to the exchange message of the state-owned company.
The call was made through the issuer, Kondor Finance plc. We are talking about securities totaling $1.5 billion. Naftogaz offers borrowers to defer payments on securities for two years, we are talking about bonds issued in 2019. The first part of the issue was for three years and with a maturity on July 18, 2022 in the amount of $335 million at 7.375%, the second part – for 600 million euros at 7.125% for a period of five years, and finally the third part – for $500 million with a yield of 7.625% for a period of seven years. The company intends to convince investors to redeem the first and second parts of the issue on July 19, 2024, and to postpone coupons for Eurobond-2026 to November 8, 2024.
“In light of the protracted circumstances affecting Ukraine as a result of the ongoing Russian military incursion and its impact on Ukraine’s energy security, the Issuer, at the request of the Borrower, has initiated this Consent Request to obtain the approval of the Noteholders to facilitate the Borrower’s retention of available cash to support Ukraine’s strategic priorities. ”, — stated in the exchange message.
As part of the proposal, the state-owned company intends to exclude the possibility of a default on the securities if the company's proposal is approved by creditors. Naftogaz calls the official reason for the delay the demand of the Ukrainian government to fill the storage facilities with gas by October 1 to the extent that the heating season can pass steadily and provide heat to citizens and companies.
The company estimates the cost of these tasks at $7.8 billion, with these funds Naftogaz will be able to pump 5.6 billion cubic meters of gas. The company also notes that it is forced to sell gas to the population at prices significantly lower than the European average, which negatively affects its financial position. Special attention is paid to the war with Russia, the company calls it the main reason for the fall of the economy and the slowdown in business activity.
“It is possible that the borrower will not be able to comply with the current provisions of the relevant loan agreements while the invasion continues. Therefore, the borrower considers it necessary and reasonable to remove restrictions that may jeopardize its priorities and objectives, in addition to removing the administrative burden on the borrower in these exceptional circumstances,” the Ukrainian company said in a statement.
The company does not plan to pay additional money for the delay, voting among Eurobond holders will take place on July 21, the results will be announced on July 26. The American financial conglomerate Citigroup will act as an agent for the borrowers under Naftogaz's offer. The agency notes that against the backdrop of reports of difficulties with repayment of debts during trading on the Frankfurt Stock Exchange, the company's bonds collapsed. The issue due in 2024 fell to 10% of the original cost (nominal value), and with the maturity in 2026 – to 20%.
The constant competitor of Naftogaz, the Russian state-owned company Gazprom, also faced problems in paying off its own debts. The Russian monopoly cannot redeem its papers due to sanctions, as the payment operator, Citigroup, does not transfer money to the holders of the papers.