Ukrainian officials held talks in London with investors in hopes of winning a reprieve on $500 million worth of Eurobonds issued by the state energy company Naftogaz that mature Wednesday.
The debt-laden company, a
crucial link for supplies of Russian natural gas to Europe, is seeking
to restructure $1.65 billion in foreign debt coming due this year,
including the Eurobonds.
Naftogaz has proposed converting the
existing bonds into new ones that would mature in five years and
increasing the interest rate from the current 8.125 percent to 9.5
percent. The proposal includes explicit state guarantees for the bonds.
“We
are conducting meetings with our creditors and frankly I am convinced
that our proposal will be accepted,” Naftogaz head Oleh Dubina said
Wednesday, in remarks to local news agencies confirmed by his press
service. “We already have some positive feedback from some banks, so I
think everything will be fine.”
However, a final agreement on the
restructuring is due to be reached at an Oct. 19 bondholder meeting,
according to a Naftogaz proposal, well after the Wednesday deadline.
Fuel
and Energy Minister Yuriy Prodan confirmed that Naftogaz will be unable
to pay on the Eurobonds Wednesday, saying that the company will only
pay interest on the bonds by the end of the day, the Interfax news
agency reported.
Naftogaz, however, later said in a statement
that Prodan’s comments did not reflect its official position. The
company declined further comment.
Analysts said a default on the
Eurobonds would be unlikely to have a drastic impact on Naftogaz or
other government bonds because a deal is likely to be reached within
weeks.
“They will not pay today, so it will mean a default,” said
Olga Slyvynska, a bond analyst with the investment bank Dragon Capital
in Kyiv. “But in the end the restructuring will be agreed on and implemented.”
Petr Grishin, an analyst with the investment bank Renaissance Capital, agreed that investors will approve the deal.
“We
believe there is a very high probability that bondholder committee
members will participate in the restructuring on the offered terms,” he
said.
Previous debt problems at Naftogaz has contributed to
disruptions in natural gas supplies to the European Union. A pricing
dispute with Moscow left millions of Europeans without heat for two
weeks in January after Russia turned off supplies accusing its neighbor
of stealing gas.
