Naftogaz Preparing New Draft Agreement On Obtaining Consent Of Eurobond Holders To Delay Payments

The Naftogaz of Ukraine National Joint Stock Company is preparing a new draft agreement on obtaining the consent of Eurobond holders to delay payments.

This is stated in the company's message, Ukrainian News Agency reports.

“The CMU Decree No. 625-r of July 21, 2022 establishes that Naftogaz, in particular its officials and other authorized persons, is obliged to take any actions to perform a transaction regarding the company's Eurobonds after separate approval of such actions by the CMU. Since the proposal to delay payments on Eurobonds, due to the government's position to send these funds to gas imports, is not supported by Eurobond holders, the existing conditions on Eurobonds remain valid, and the corresponding payments of the principal amount of debt and interest should be received by the bondholders on July 26, 2022 (during the stipulated period documentation to correct violations),” the statement reads.

It is reported that in accordance with the aforementioned decision of the government, as well as the company's obligations to pay Eurobonds, its leadership turned to the Cabinet for the approval of these payments.

"In its appeals to the government, the NJSC 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 “severe default", which will occur if the government does not agree on Naftogaz's payment to bondholders. At the moment, Naftogaz has not received government approval, and, accordingly, cannot transfer funds for payments to bondholders. Note that in accordance with the above-mentioned government decision, Naftogaz is preparing a new draft agreement to obtain the consent of Eurobond holders to delay payments, which fully meets the government's requirements," the message says.

As Ukrainian News Agency earlier reported, the Cabinet of Ministers has found that the work of the board of the Naftogaz of Ukraine National Joint-Stock Company on changes to the credit conditions of Eurobonds is unsatisfactory.

Fitch Ratings, an international credit rating agency, has downgraded National Joint Stock Company Naftogaz of Ukraine's Long-Term Issuer Default Rating (IDR) to 'C' from 'CCC' following its consent solicitation to defer its debt servicing of its Eurobonds, including that due on July 19, 2022.

In particular, the agency notes that Naftogaz asks to postpone payments of the principal and coupon on its bonds in the amount of USD 335 million, payable on July 19, 2022, until July 2024

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

In November 2019, Naftogaz placed seven-year Eurobonds worth USD 500 million at a rate of 7.625% per annum.

Also in July 2019, Naftogaz placed five-year Eurobonds for EUR 600 million at a rate of 7.125% per annum and three-year Eurobonds for USD 335 million at a rate of 7.375% per annum.

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

Naftogaz of Ukraine is the leading company in Ukraine in terms of exploration and development of oil and gas deposits, drilling, transportation, and storage of crude oil and natural gas, and supply of natural gas to consumers.

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