KIEV, Ukraine - Ukrainian authorities on Wednesday sought to reassure investors that the state energy company Naftogaz will not default on its $1.6 billion loan and will be able to restructure the debt, news reports said.
But analysts and creditors warned that a default by the troubled company, which transports Russian natural gas to European consumers via Ukrainian pipelines, was possible and could badly tarnish the country’s image. Previous debt problems at Naftogaz have contributed to disruptions in European natural-gas supplies.
Prime Minister Yulia Tymoshenko’s government is vowing to provide state guarantees for the restructuring of Naftogaz’s foreign debt this year, which includes $500 million in Eurobonds that mature Sep. 30.
The Cabinet has instructed Naftogaz to reach an agreement with investors by Oct. 20, but nervous bondholders are pressing for repayment by Sep. 30.
“We are meeting all the deadlines, an agreement will be reached,” Fuel and Energy Minister Yuriy Prodan told reporters, according to the Unian news agency. “There won’t be any default.”
Prodan’s spokesman Fent Di could not immediately confirm the statement.
Experts, however, say that a Naftogaz default on the $500 million Eurobonds was a possibility.
“The company, the government (seem) to be trying to close a deal by October 20, long after the Sept. 30 redemption date for the 2009 Eurobonds, and raising the specter of default,” said Timothy Ash, London-based head of emerging market research at Royal Bank of Scotland.
Ash added that the problems at Naftogaz bode ill for the sustainability of the government’s and private companies’ debt. “Frankly I struggle to be positive,” Ash said.
A group representing financial institutions holding about 20 percent of Naftogaz’ Eurobonds dismissed Prodan’s statement, saying it was certain Naftogaz would default on the Eurobonds. Philipp Thomas, a spokesman for the group, said Naftogaz and the Ukrainian government were too slow and unprofessional in conducting restructuring talks and that it was now too late to meet the deadline. Thomas said that bondholders would start litigation against Naftogaz.
“They cannot possibly avoid default,” Thomas told The Associated Press by telephone. “Bondholders are totally angry at Naftogaz; Naftogaz is very unprofessionally run.”
Naftogaz declined to comment.
A price and payment dispute between Naftogaz and Russia’s state-controlled gas monopoly Gazprom led to disruptions in supplies of Russian gas to Europe last winter, when Gazprom turned off the taps carrying gas into Ukraine.
