Fitch affirms DTEK Energo's bond at 'C'; expects upgrade AFTER restructuring
Fitch Ratings has affirmed Ukraine-based DTEK Energy B.V.'s (DTEK) Long-Term Foreign-Currency Issuer Default Ratings (IDR) at 'RD' (Restricted Default).
The agency has also affirmed DTEK's U.S. dollar Eurobond senior unsecured rating at 'C' with a Recovery Rating of 'RR4' and an expected recovery of 50%.
According to the document, the affirmation reflects continued negotiation on the restructuring of the remaining portion of debt (about 11% of debt was still subject to restructuring at end-2018).
"Once completed, Fitch will likely upgrade DTEK's Foreign- and Local-Currency IDRs and the senior unsecured rating for the Eurobond to 'B-' to reflect the company's post-restructuring capital structure and business risk," Fitch said in its press release.
Fitch said that the post-restructuring bank debt profile has a comfortable mid-term maturity schedule, with short-term debt payments of $84 million in 2019 and contractual amortisation payments of $20 million annually over 2020-2022 and a large bullet repayment in June 2023.
"The expected post-restructuring IDR of 'B-' reflects our assessment of the company's post-restructuring capital structure and high business risks. This envisions exposure to the weak Ukrainian operating environment, spin-off of distribution assets from 2019, assets located near the conflict area, and uncertainties regarding liberalisation of Ukrainian electricity market," Fitch said.
Fitch's rating is based on capex at average UAH 13 billion over the 2019-2022, which is above management expectations. Fitch expects DTEK's available cash of UAH 3.4 billion ($123 million) at end-2018 and forecast free cash flow (FCF) of about UAH 3.6 billion ($128 million) on average in 2019-2020 to comfortably cover debt maturities of UAH 2.9 billion ($104 million) in 2019-2020.
At the end of 2016, DTEK Energy exchanged previously issued eurobonds for $750 million maturing on April 4, 2018 and $160 million due on April 28, 2018 for a new issue with a maturity date of December 31, 2024.