NOTEHOLDER UPDATE IN RELATION TO UKRENERGO
ISSUED BY PRIVATE JOINT STOCK COMPANY 'NATIONAL POWER COMPANY 'UKRENERGO"" (THE 'COMPANY')
LONDON, Feb. 10, 2025 /PRNewswire/ -- The Ad Hoc Group of holders of the Notes (the 'Ad Hoc Group'), advised by Cleary Gottlieb Steen & Hamilton LLP, wishes to comment on the Company's announcement issued today (the 'Company Announcement').
It is the view of the Ad Hoc Group that the proposal put forward by the Company detailed in the Company Announcement (the 'Company Proposal') has no prospect of approval by a requisite majority of holders of the Notes nor does it form the basis for viable point of engagement with Noteholders.
The Ad Hoc Group considers that the proper context for evaluating the Company's request for a debt restructuring includes the following considerations:
There is no historical example of a haircut being imposed by a state-owned enterprise ('SOE') in Ukraine. Ukrainian SOEs (including the Company) are commercial entities. Where SOEs have entered into debt restructurings, such transactions have always been conducted on the basis of the entities' debt capacities and commercial relationships. In the current case, where the Noteholders additionally benefit from credit enhancement in the form of a sovereign guarantee, a haircut would be even more unwarranted.
There is no economic reason for the Company not to provide a par recovery on the basis of its current financial position – it is clear that the Company is liquid, solvent and has the financial capacity to make payments on the Notes on time.
By agreeing to suspend coupon payments until November 2024, holders of the Notes have already provided considerably more cash flow relief to the Company than any of its other creditors (whose indebtedness ranks pari passu with the Notes and who, despite ranking pari passu with the Notes, continued to receive payments on their indebtedness during this period).
In the event the Company were to aim for a non-par recovery (which is not justified on commercial grounds), it should enter into comprehensive debt restructuring negotiations with all of its pari passu lenders. The Company has shown no intention to date of adopting a common approach to all its creditors.
The Notes were issued as Green Bonds which provided financing to the Company on concessional terms. The use of proceeds of the Notes was to cancel the Company's overdue obligations to renewable energy producers. It would be commercially egregious to tap markets for concessional Green Bonds to cover the Company's obligations to renewables producers and then ask or expect Green Bond holders to accept anything other than full repayment of the subsidized financing provided. The Group notes that the Company entered into a borrowing more recently with similar use of proceeds from multilateral sources. There is no commercial basis to support selectively restructuring debts that are legally and logically indistinguishable.
The Company Proposal does not adhere to any of these principles and moreover:
It uses the sovereign guarantee in support of the Notes (a credit enhancement tool) to detract from rather than enhance Noteholder recoveries. This is illogical and an effort to obfuscate the point that, consistent with historical practice, a haircut would not be justified even without a sovereign guarantee.
It is entirely at odds with market expectations based on historical precedent, the Company's circumstances and current market prices of the Notes.
It is underpinned by inaccurate or otherwise incomplete data, information and assumptions. In relation to this, the Ad Hoc Group also notes that the Company did not include provision for full payment in respect of the Notes in their 2025 tariff submission (which is wholly inconsistent with its obligations under the Notes). There is little currency to be gained by an argument that its tariffs do not support payments under the Notes, when the Company failed to request tariffs consistent with its financial obligations.
Notwithstanding this, the Ad Hoc Group remains willing to engage with the Company constructively regarding a potential transaction in relation to the Notes provided that such engagement is underpinned by the key principles set out above. To this end, the Ad Hoc Group provided an indicative term sheet setting out a proper basis for constructive, good-faith negotiations with a view to delivering a transaction that would be able to command sufficient support from holders of the Notes to be implementable (the 'AHG Proposal'). The key terms of the AHG Proposal are as follows:
1. Payment by the Company of all past due interest on the Notes in full.
2. Either of the following to enable a partial de-risking of the Notes in exchange for releasing the full sovereign guarantee:
a. a partial paydown of the Notes in cash with holders of the Notes receiving US$460 in cash for each US$1,000 in principal amount of the Notes; or
b. the Notes receiving the benefit of a security package consisting of the same instruments that were provided by the sovereign to holders of the sovereign's USD 7.75% Notes due 2024 as part of the most recent sovereign restructuring transaction. I.e. for each US$1,000 of aggregate principal amount of, and accrued interest on, the Notes:
US$280.00 in principal amount of Step Up A Bonds 2029;
US$120.00 in principal amount of Step Up A Bonds 2034;
US$21.85 in principal amount of Step Up B Bonds 2030;
US$81.65 in principal amount of Step Up B Bonds 2034;
US$69.00 in principal amount of Step Up B Bonds 2035; and
US$57.50 in principal amount of Step Up B Bonds 2036.
3. To the extent not redeemed, the Notes remaining in place on their existing terms and payment schedule but with a coupon of 8.5%.
4. A consent fee of US$20 in cash for each US$1,000 in principal amount of the Notes.
The Ad Hoc Group considers the AHG Proposal to be fully compatible with the 'Most Favoured Creditor' provisions in the sovereign bond documents.
Whilst the Ad Hoc Group remains willing to engage with the Company to agree a workable solution, for such discussions to have any prospect of being successful the Company would need to agree to engage with the Ad Hoc Group on the basis of the principles set out above.
Holders of the Notes are invited to contact Alastair Goldrein or James Armshaw of Cleary Gottlieb Steen & Hamilton LLP for further information. The contact details for Messrs. Goldrein and Armshaw appear below:
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