13:30 11.11.2019

Naftogaz wins freeze on accounts of Gazprom yen bond issuer GazAsia Capital

3 min read
Naftogaz wins freeze on accounts of Gazprom yen bond issuer GazAsia Capital

 Naftogaz Ukrainy, which is hunting for the foreign assets of Gazprom to enforce a Stockholm arbitration ruling, has won a ruling to freeze the accounts of the SPV that issued the Russian gas giant's yen-denominated Eurobonds, GazAsia Capital S.A., Gazprom said in a memorandum for a new Eurobond offering.

The arbitration ruling ordered Gazprom to pay Naftogaz a penalty in the amount of $4.63 billion for underusing Ukrainian gas transit capacity. Taking into account that the court earlier confirmed that Naftogaz owed $2.018 billion for gas supplies, the total amount due from Gazprom is $2.56 billion. Gazprom is trying to appeal these rulings, but the Ukrainian company does not want to wait for the appeal to be considered and is trying to collect the funds in various jurisdictions.

On February 15, 2019, a court bailiff issued an order to bar a number of companies, including branches of the biggest banks in Luxembourg and Gaz Capital S.A., the issuer of Gazprom's previous main Eurobond program, from making payments to the Russian company. This decision essentially halted Gazprom's activity on the public borrowing market until the registration of a new program.

In the new memo, Gazprom reported for the first time that it is also aware of a court bailiff order barring GazAsia Capital S.A. from making payments to Gazprom. This SPV placed 10-year Eurobonds totaling JPY65 billion in December 2018.

The Luxembourg court rulings that were not in Gazprom's favor forced the company to register the bond program in another jurisdiction. It chose the UK, whose courts protected Gazprom assets from Naftogaz's attacks. The new SPV is Gaz Finance plc.

S&P Global Ratings withdrew the rating of the GazAsia Capital S.A. bond program in June 2019 at the request of Gazprom.

The memo said that Gazprom appealed to the Luxembourg court on April 15, 2019 to challenge the account freeze and to join the court proceedings. The court denied the motion, although a court ruling on Gazprom was not handed down, Gazprom challenged this decision. The appeal hearing is scheduled for January 2020, the memo said.

In addition, in May 2019 a Luxembourg court issued a ruling to recognize and enforce the ruling to pay Naftogaz in the transit dispute. Gazprom also filed an appeal against this ruling and the appeals court accepted it, but a court hearing has not been scheduled yet.

Gazprom said it is studying available legal remedies to protect its rights and interests.

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