Naftogaz Must Make Payments On Eurobonds Today Or Receive Postponement From Their Owners

On Tuesday, July 26, the Naftogaz of Ukraine national joint-stock company must make payments on Eurobonds or receive a postponement from their owners.

Ukrainian News Agency learned this from a statement of Naftogaz.

"Order of the Cabinet of Ministers of Ukraine dated July 21, 2022 No. 625-r establishes that Naftogaz, in particular, its officials and other authorized persons, are obliged to take any actions regarding the execution of the transaction regarding the Company's Eurobonds after separate approval of such actions by the Cabinet of Ministers. Since the proposal regarding the postponement of Eurobond payments, due to the government's position to direct these funds to gas imports, is not supported by Eurobond holders, the existing terms of Eurobonds remain in force, and the corresponding payments of principal and interest must be received by bondholders on July 26, 2022 (within the period stipulated in the documentation for correction of violations)," the statement reads.

In its appeals to the government, Naftogaz reported that the company's accounts have funds for making payments, as well as possible risks for it and for the state as a whole in the event of a "hard default" that would occur if the government does not agree to the payment by Naftogaz to bondholders.

At the same time, on the afternoon of July 25, Naftogaz reported that it had not yet received the approval of the government, and accordingly, it could not transfer funds for payments to bondholders.

At that, according to the statement, to implement the government's decision, Naftogaz is preparing a new draft agreement on obtaining the consent of Eurobond holders to postpone payments, which fully meets the requirements of the Cabinet of Ministers.

As Ukrainian News Agency earlier reported, the Cabinet of Ministers recognized the unsatisfactory performance of the Naftogaz board regarding changes in the credit terms of Eurobonds.

The Fitch Ratings international rating agency lowered the long-term issuer default rating (IDR) of the Naftogaz of Ukraine national joint-stock company from CCC to C after the company requested consent to postpone debt service on its Eurobonds, including those due on July 19, 2022.

In particular, the agency notes that Naftogaz is asking to postpone payments of the principal amount of the debt and the coupon for its bonds in the amount of USD 335 million, which is due for repayment on July 19, 2022, until July 2024.

In the context of this requirement and Naftogaz's weak liquidity, Fitch believes that the consent request was made to avoid default.

In November 2019, the Naftogaz of Ukraine national joint-stock company placed 7-year Eurobonds in the amount of USD 500 million with a rate of 7.625% per annum.

Also in July 2019, Naftogaz placed 5-year Eurobonds for EUR 600 million at an annual rate of 7.125% and 3-year Eurobonds for USD 335 million at an annual rate of 7.375%.

The Kondor Finance company is engaged in the issue of Naftogaz Eurobonds.

The Naftogaz of Ukraine national joint-stock company is a leading enterprise of the country's fuel and energy complex, which is engaged in the exploration and development of deposits, drilling, transportation and storage of oil and gas, as well as supplying gas to consumers.