Ukraine’s state energy giant on Sept. 24 offered bondholders to swap its $500 million Eurobonds maturing next week for fresh sovereign-guaranteed bonds with a 9.5 per cent coupon and five-year maturity.
European
officials and bankers are closely watching the talks, which are also seen as
key to Naftogaz Ukraine’s bigger plans – rolling over a total of $1.6 billion
in external debts. The cash-strapped company plays a critical role in supplying
Europe with Russian gas. But it has centered in repeated clashes with Russian
gas monopoly Gazprom, including last January’s spat that disrupted gas flow to
Europe.
Naftogaz
made its restructuring offer just days before the Sept. 30 bond maturity date,
and is expected to fall into a technical default during negotiations with
investors. The state guarantee, not included on the previous issue, is one
incentive offered. Also, Naftogaz said bond holders that accept the swap by
Oct. 8 will avoid a 5 percent exchange penalty that will be slapped upon those
who wait for the final Oct. 15 deadline.
It remains
unclear whether bondholders will accept the offer, or force Naftogaz into
payment or default. Many bondholders see
the late offer as a forceful attempt to corner them into the swap. Some believe
Naftogaz can make payment.
Naftogaz
insists restructuring is essential to keep the company afloat. Selling gas to
households at prices lower than Russian import bills, Naftogaz’s finances have
worsened in recent years and were further hit by depreciation of Ukraine’s
currency.
Political
factors could also affect Naftogaz’s restructuring plans. The bonds are
believed to be owned by a mix of hedge funds and influential business tycoons
from Ukraine and Russia. Some note holders may have an interest in blocking the
restructuring process to embarrass Prime Minister Yulia Tymoshenko, undermining
her government and presidential bid.
