Ukrainian national oil and gas company Naftogaz has sufficient funds to redeem $500 million worth of Eurobonds in late September as scheduled, according to a group formed by some of the company's bondholders.
The Naftogaz Bondholder's Action Group bases its claims on the fact that the company was able to pay some $1.3 billion for supplies of Russian gas in July-August and also has more than $1 billion in domestic government loan bonds in its possession.
Carl Philipp R. Thomas, an associate of Luxembourg-based Aequi-Libria consultancy firm and a member of the action group, told journalists on Monday that it appears Naftogaz is trying to conceal its actual liquidity so that it can follow through on the unjustified restructuring of the bond payments.
The company's financial results released in late August do not reflect its actual financial standing and mislead bondholders, he said.
Thomas said Naftogaz failed to fulfill its obligation to release audited, consolidated financial results under International Financial Reporting Standards (IFRS) since its subsidiaries were either not included in the report or their results were not presented in line with IFRS.
In addition, investors need to pay attention to the discrepancies between the financial report and the company's real liquidity level, he said.
According to the National Bank of Ukraine, the government issued UAH 18.6 billion worth of domestic loan bonds between August 3 and 10 to increase Naftogaz's charter capital. The company then sold about UAH 4.6 billion of the bonds to Ukrainian banks, using the funds it received to pay Gazprom for more than $600 million in Russian natural gas imported in July, he said. A similar scheme was likely used in early September as well to pay for $667 million worth of gas supplies in August, he said.
Thus, Naftogaz is being monetized but is not reporting this in its financial reports, Thomas said.
The group of bondholders has also determined that the deadline for Naftogaz to send out a proposal on the restructuring of the bonds expired on Monday, he said. The company would have had to send out the proposal on Monday so that a resolution could be found before September 30, the date the Eurobonds are to be redeemed, the group says.
Late last week, acting Finance Minister Ihor Umansky denied that the National Bank was monetizing Naftogaz by injecting domestic government loan bonds into its charter capital.
In addition, a source in the government told Interfax that Naftogaz can send out a proposal on the restructuring of debt later than the deadline cited by the group of creditors opposed to restructuring.
Naftogaz said in its consolidated financial statement for 2008 released on September 2 that it had begun talks on restructuring about $1.6 billion in debt owed to foreign banks.
Interfax understands that the $1.6 billion in debt that Naftogaz is seeking to restructure includes $220 million owed to Depha Bank, $550 million owed to Credit Suisse International (CSI), and $395.2 million owed to Deutsche Bank, which are due to be repaid in 2009-2012.. Taking into account the Eurobonds and interest, the overall sum due to be paid is about $1.78 billion, including about $650 million due in 2009 and about $570 million in 2010.
At the same time, a group of holders of Naftogaz Eurobonds worth about $100 million, or 20% of the overall bond issue, say they disagree with the possible restructuring. A representative of that group predicts that other investors may join the group and that they will be able to veto the restructuring if more than 25% of the bondholders dissent.
Naftogaz first deputy chairman Ihor Didenko has called the initiators of the group's creation "speculators who are posing as concentrators of our debt."
The official exchange rate on September 7 was UAH 7.995 /$1.
