Ukraine’s Naftogaz stumbles into default amid new debt overhaul push

By Karin Strohecker and Natalia Zinets

LONDON/KYIV (Reuters) -Ukraine’s Naftogaz has develop into the primary Ukrainian authorities entity to default because the begin of the Russian invasion, after the state power agency stated it will not make funds on worldwide bonds earlier than the Tuesday expiry of a grace interval.

The default might speed up repayments on the 2 different Naftogaz bonds, however doesn’t set off a sovereign cross-default.

The power firm stated in a press release that it had did not get collectors’ assist on a proposal to freeze funds on a few of its bonds for 2 years, which it launched on July 12 saying Russia’s invasion meant lots of its prospects have been now unable to pay their payments.

The proposal failure meant that to remain present, it will have needed to pay $335 million in principal plus curiosity on its 2022 situation, in addition to a separate curiosity installment on a 2024 bond, earlier than the tip of the day.

“Naftogaz has not obtained consent from the cupboard of ministers of Ukraine to make the required funds,” the corporate stated in a press release.

“Sure occasions of default have or will happen because of the decision and the ensuing failure to pay.”

Central financial institution Governor Kyrylo Shevchenko stated a Naftogaz default doesn’t cross-default into the sovereign.

“I hope that Naftogaz, along with the ministry of finance of Ukraine, that they may discover a answer. The results might be solely regarding Naftogaz,” he stated of the default announcement.

Naftogaz, which points its bonds by way of its financing arm Kondor Finance, accounted for nearly 17% of Ukraine’s public income final 12 months.

FRESH PROPOSAL

Naftogaz additionally stated that it was working to launch a contemporary proposal for debt remedies that had been drafted by the Cupboard, whereas a authorities supply stated Kyiv ordered Naftogaz to start a second spherical of talks with bondholders.

The federal government launched its separate deferral solicitation final week, and stated key collectors had already backed its plan.

Individually, Kyiv stated it requested holders of $1.5 billion in bonds from state companies Ukravtodor and Ukrenergo to additionally defer funds for 2 years.

“We anticipate that collectors will assist Ukraine’s attraction,” Prime Minster Denys Shmyhal wrote of the proposal by way of Telegram. “In at this time’s unprecedented challenges, this coverage will apply to all of our commitments.”

(Reporting by Karin Strohecker, Marc Jones Jorgelina do Rosario and Rodrigo Campos; Modifying by Sandra Maler and Marguerita Choy)