According to Ukraine’s Naftogaz, bondholders reject the second proposal to suspend debt payments

By Marc Jones

LONDON (Reuters) – Ukraine’s state-owned gas company Naftogaz said on Wednesday its 2022 bondholders had rejected its recent proposal to suspend its debt payments for two years following the Russian invasion.

Naftogaz, which accounted for nearly 17% of Ukraine’s total state budget revenue last year, has defaulted after failing to make a series of interest payments last month.

Wednesday’s news that bondholders had rejected their request for a forbearance for a second time came as fewer than 20% of 2022 bondholders had supported a watered-down proposal.

However, for two other bonds in focus, a 2024 bond and a 2026 bond, not enough bondholders had voted on the plan, so the process was postponed and will resume on August 31.

With respect to the 2024 Bonds, the existing quorum was approximately 49% of the total principal amount. Around 74% of the votes cast were in favor of the two-year payment deferral plan.

For the 2026 bond, the quorum was about 54% of the total principal amount, but only 43% of the votes were in favor of the deal.

“We urge bondholders to support the proposals to be considered at the adjourned meetings,” Naftogaz said.

Getting enough support could be difficult as some bondholders believe Naftogaz has enough cash, at least for now, to continue making payments despite the war.

Its second proposal had offered a range of improved and more consistent terms than its original plan, but creditors’ rejection of the 2022 bond means it must now submit a different proposal or remain in default.

“Naftogaz is considering the next steps together with the Cabinet of Ministers of Ukraine as the sole shareholder and the Ministry of Finance,” it said in a statement. “Further information will be communicated to bondholders when possible.”

(Reporting by Maria Ponnezhath in Bengaluru; Editing by Kirsten Donovan and Alexander Smith)