Vodafone Ukraine decides against continuing Eurobond restructuring talks with holders

MOSCOW. Oct 4 (Interfax) - Ukraine's second biggest mobile operator, Vodafone (VFU), has held negotiations with holders of its $400 million notes on the possibility of restructuring them, but decided against further negotiations after the holders of approximately 31% of the securities rejected the proposed terms, Ukrainian media reported, quoting a company filing with the Irish Stock Exchange.

"In light of this, VFU announces that it does not, in the absence of changes to the capital controls, expect to engage in further negotiations with the bondholders. Instead, VFU will focus on other avenues for addressing its obligations under the notes, namely continuing its discussions with the relevant authorities in Ukraine, including the National Bank of Ukraine, on granting an exceptional approval for the payment of the notes' principal due on February 11, 2025," the company said.

It said talks were held on September 19-30 on restructuring the five-year, 6.2% notes issued in 2020 amid the ongoing capital controls in place in Ukraine which currently prevent VFU from making cross-border payments out of Ukraine to redeem the notes.

The key terms proposed to the note holders were: the extension of the maturity date of the notes by three years, increasing the interest rate of the notes to 7.7% and the payment of a consent fee of 1.5% as well as a pledge over VFU's cash balances held in Ukraine for the purpose of repaying the notes in the event the current capital controls are relaxed.

"However, following negotiations, the restructuring proposal was rejected by bondholders holding approximately 31% of the notes," the company said.

VFU said that while the capital controls currently prevented it from making cross-border payments out of Ukraine to facilitate the repayment of the notes, its financial position remained strong and it had enough liquidity to satisfy its payments obligations within Ukraine as they fall due for the foreseeable future.

As reported, on February 14 this year, the Ukrainian government asked the National Bank to allow the sale of currency to large Ukrainian companies and holdings and its subsequent transfer for settlements on Eurobonds and with Western creditors. The list included VF Ukraine, companies from the pipe and wheel holding Interpipe, the largest mining and metallurgical holding Metinvest, the agroholding Kernel and three DTEK holdings, namely DTEK Energy, DTEK Renewables and DTEK Oil and Gas.

The National Bank did not grant the requests, but it relaxed the currency restrictions in May and July, making it easier to service but not to redeem corporate Eurobonds.

VFU paid $12.4 million in regular interest on the bonds in August. "The payment has been transferred from the company's onshore bank account which was possible after the latest currency control liberalization allowing cross-border payments for servicing the debt," it said on its website at the time.

VFU's net profit fell 14% year-on-year in H1 2024 to UAH 1.954 billion. Revenue grew, by 13% to UAH 11.707 billion. The company had 15.9 million subscribers as of June 30, 2024.

VFU has been part of NEQSOL Holding, a diversified group of companies operating in the energy, telecommunications, high-tech and construction sectors, since December 2019.