Naftogaz restructures EUR 1.2 bln in eurobonds – company
The Naftogaz Group has restructured its eurobonds totalling EUR 600 million, maturing on July 19, 2026, and $500 million, maturing on November 8, 2028, to January 15, 2032, and January 15, 2033, respectively.
"The decision was supported by more than 90% of the bondholders in each series," according to a Naftogaz press release issued Tuesday evening.
According to the release, the total amount of the restructuring is set at EUR 1.2 billion.
"The restructuring of the eurobonds gives us more opportunities to direct additional resources toward restoring infrastructure following Russian attacks – of which there have been about 250 this year alone – and to prepare for the heating season," CEO of the Naftogaz Group Serhiy Koretsky said.
It is noted the restructuring is one of the key steps in ensuring Naftogaz's financial stability amid a full-scale war and systematic attacks on Ukraine's energy infrastructure.
"The company continues to fulfill its obligations to the state and consumers and is preparing for the upcoming heating season," the company said in the press release.
According to Naftogaz's stock exchange announcement, the quorum at the meeting regarding the 2026 eurobonds was 97.02% of all bonds, with 99.43% of votes cast in favor. For the 2028 Eurobonds, these figures were 94.67% and 99.7%, respectively.
As previously reported, the new 2032 eurobonds denominated in euros are proposed to be gradually repaid according to the following schedule: 6% (EUR 41.678 million) on January 15, 2027, 7.5% (EUR 52.098 million) – July 15, 2027, and then in equal semi-annual payments starting July 15, 2029.
For the 2033 eurobonds denominated in U.S. dollars, the repayment schedule is different: 17.5% each from July 15, 2030, through January 15, 2032, and 15% each on July 15, 2032, and January 15, 2033.
The terms proposed for a vote were generally consistent with those announced on June 9, when the Naftogaz Group announced that it had reached an agreement in principle on restructuring with an ad hoc committee of holders representing approximately 40% of these securities regarding the extension of their maturity dates to 2032-2033.
In exchange for agreeing to the restructuring, holders of the 2026 Eurobonds will receive 1% of face value, holders of the 2028 Eurobonds will receive 0.5%, and the ad hoc committee will receive 0.25%. Payment is expected on July 17.
The coupon rate for both the 2026 Eurobonds, currently 7.125%, and the 2028 eurobonds, currently 7.625%, will be raised to 8.95% per annum.
At the same time, for the first three coupon payments, Naftogaz will be able to pay 6% in cash, and issue additional bonds to cover the remaining 2.95%; for the fourth payment on July 15, 2028, this ratio will change to 6.5% and 2.45%, after which all coupons will have to be paid in cash.
It was also announced that 80% of the interest accrued but unpaid as of the transaction date on the 2026 Eurobonds will be paid in cash, while the remaining 20% and 100% of the accrued interest on the 2028 Eurobonds will be capitalized.
According to the proposal, the covenants for both Eurobond issues will remain in place. At the same time, concessions have been made to allow Naftogaz to borrow from international financial institutions and state-owned banks.
Also among the new terms is a ban on dividend payments until the Eurobonds are fully repaid, though with the exception of cases where the company is required to do so under current Ukrainian law.
Furthermore, Naftogaz must maintain a rating from at least one rating agency at all times until the Eurobonds are repaid, and must also consider using funds awarded by an arbitration award in the dispute against the Russian Federation to repay the eurobonds.
Applications from Eurobond holders were accepted until July 9, voting was scheduled for July 14, and the transaction was to be completed by September 16.
Koretsky said the company is forced to compensate for the loss of its own gas production due to Russian attacks with more expensive imported supplies, which undoubtedly affects its financial and economic performance.
"The situation is further exacerbated by other factors, including obligations to provide public services (also known as PSO), which the Group must fulfill in accordance with applicable law to help mitigate the negative impact of the war, as well as the loss of revenue from oil and gas transit," the restructuring proposal stated.
According to the proposal, these recent factors have collectively contributed to a significant decline in the Group's profitability and placed an extraordinary strain on its available liquidity.
"In response to these factors, the (restructuring) Proposal is designed to enable the Group to mitigate significant infrastructure damage, build up natural gas reserves sufficient at least to cover the 2026/2027 heating season (as well as future heating seasons), restore liquidity, and properly fulfill the obligations imposed on it by the Government of Ukraine under the PSO," Naftogaz said.
The requested deferral period also reflects capital expenditure needs, which the Group expects to remain elevated in the near term and which cannot be significantly reduced without jeopardizing the stability of Naftogaz's operations," the company added.
Naftogaz selected Rothschild & Co. as its financial advisor to facilitate engagement with bondholders and formulate the proposal.