Naftogaz Faces Tougher Path to Debt Relief Than Owner Ukraine

(Bloomberg) — Ukraine’s biggest gas company may struggle to gain approval from bondholders for its last-minute request to delay debt payments.

The vote on NJSC Naftogaz Ukrainy’s proposal — which was forced by the government — comes a day after the sovereign got backing from key creditors for a similar request.

It’s not clear if the vote will pass as some investors thought the state-run energy firm’s plan was unjustified given its financial position, according to four people familiar with the matter. The deadline for bondholders to vote passes at 4 p.m. in London.

Naftogaz last week asked the holders of about $1.4 billion of its foreign bonds for a two-year freeze on principal and interest payments to save cash for gas purchases for winter. 

Postponing the debt payments would let the company save $546.6 million, according to Bloomberg calculations. The request was triggered by a government order Naftogaz hadn’t expected, Chief Executive Yuriy Vitrenko said last week. The government wants the company to conserve cash to buy more gas this winter.

The energy company is in a grace period ending July 26 after failing to redeem a $335 million note that matured on Tuesday. In the event of a default, it would trigger immediate repayment on its two other bonds, maturing in 2024 and 2026. 

Ukraine said Wednesday it would seek a similar two-year halt on payments on its foreign debt, as well as an amendment of terms on its so-called GDP warrants. A group of governments in the Paris Club, including the US, and private creditors such as BlackRock Inc. and Fidelity International supported the proposal, according to the Ukrainian government.