Naftogaz Eurobond holders decline to defer payments, company preparing new offer
MOSCOW. July 25 (Interfax) - The Eurobond holders of NJSC Naftogaz Ukraine have declined to accept the company's proposal to defer payments on the coupons for two years; therefore, Naftogaz will prepare another offer, taking into account the requirements of the Ukrainian government, the company said in an equities exchange statement.
"Since initiating the request [to alter the terms and conditions of the Eurobonds], Naftogaz has been engaged in constructive discussions with the bondholders. In light of resolution No. 625 of the cabinet of ministers, dated July 21, which instructs Naftogaz to enter into a new agreement on the terms that differ from the [previously] proposed, and limits the company's further actions without separate approval from the cabinet of ministers, Naftogaz plans to formulate a new proposal," the company said in the message.
Naftogaz said that the deadline for accepting responses to its proposal to holders of nearly $1.5 billion in Eurobonds to defer coupon payments on them for two years, including postponing the maturity of 2022 Eurobonds worth $335 million for the same period, expired July 21. "Based on electronic voting instructions and subproxy forms received prior to the voting deadline, the proposal is not expected to be approved at the meeting to be held for the 2022 bonds, and the necessary quorum is not expected to be reached at any of the meetings to be held for the 2024 and 2026 bonds," the company said.
The grace period on Naftogaz Eurobonds is five working days. As reported, the announcement of the results on the company's offer was scheduled for July 26 (the last day of this period).
The company also reported that the government by a resolution from July 21 prohibited making payments falling on July 19 on Eurobonds maturing in 2022 and 2024 without its prior consent.
"On July 22, Naftogaz sent a request to the cabinet to approve the payment (. . .), which was not satisfied. Naftogaz submitted an additional request for approval of such payment on July 23 and is awaiting a response from the cabinet, which has no obligation to respond within a certain period," the statement said.
The company also noted that in accordance with a government decree from June 17, Naftogaz's priority remains the accumulation of natural gas in sufficient quantities ahead of the 2022-2023 heating season, which was the main reason for the proposal to delay payments.
Previously, Naftogaz reported that it needed to import an additional 4 billion cubic meters of gas worth about $8 billion in order to comply with the decree.
As reported, there are currently three issues of Naftogaz Eurobonds on the market, all of which were placed in 2019: in July - $335 million in three-year bonds placed at 7.375% and 600 million euros in five-year bonds at 7.125% (one fifth of the bonds in euros was bought by the EBRD), and in November $500 million in 7-year bonds with a yield of 7.625%. The maturity date of the $335 million issue is July 19, 2022, the same date that the coupon payments on these securities and 2024 Eurobonds came due.
"Naftogaz offered to make all coupon payments on 2022 and 2024 bonds on July 19, 2024 and to redeem 2022 Eurobonds on the same day. Naftogaz sought to make coupon payments on 2026 bonds on November 8, 2024.
Naftogaz did not envisage any premium for holders of its bonds for deferred payments.
It was also reported that the Ukraine's cabinet of ministers recognized as unsatisfactory the work of the Naftogaz board with the issuer of its Eurobonds, Kondor Finance plc, to change the terms of the securities.
It was reported earlier that Ukraine wants to agree with the holders of Eurobonds and GDP-linked warrants to change the terms of the securities by August 15.
According to the July 19, cabinet of ministers resolution on changes to the terms of sovereign Eurobonds and derivatives, Ukraine will propose that holders of its Eurobonds extend their circulation term and defer payment of interest income on the securities for two years, Holders of GDP-warrants will be offered deferral of payments on those instruments for 14 months until the next year, with the possible amount of payments in 2025 limited to 0.5% of GDP for 2023, their maturity extended by one year, and full or partial redemption provided in 2024-2027. Should holders of Eurobonds and GDP-linked warrants refuse the offer, payments on them will be made in accordance with the terms of the issue.
