NAFTOGAZ OF UKRAINE ACCUSED THE MINISTERS OF THEIR OWN DEFAULT

Naftogaz of Ukraine announced a technical default on July 26. It occurred after the company refused to pay the holders of Eurobonds, despite the expiration of all deadlines. However, the company itself blames the Cabinet of Ministers for what happened. According to Naftogaz, officials have made the global capital market inaccessible to the firm.

Fitch agency reacted to the state of the company on July 15. After the firm published a request to postpone payments on Eurobonds, Naftogaz's rating was downgraded to a pre-default status (rating C).

 

On July 20, the firm received a subsidy of UAH 150 billion (about $5 billion) from the authorities. It was aimed at purchasing natural gas for the upcoming heating season. The firm then noted that only direct financing from the budget would help solve the issue.

On July 21, 2022, the Ukrainian government issued an order obliging the company's management to coordinate with officials any issues related to the implementation of Eurobond transactions. After Naftogaz appealed to the Cabinet of Ministers with a request to allow the payment of money on Eurobonds, the company was refused. At the same time, the firm emphasizes that the necessary money was in the accounts, and the default itself is of a technical nature.

It is known that Naftogaz in 2019 issued three types of securities for a period of 3, 5 and 7 years. Three-year bonds worth $335 million have a declared yield of 7.3%. Five-year securities in the amount of €600 million are calculated at 7.1%. Seven-year bonds worth $500 million were issued with a yield of 7.6%.

Prior to that, the firm appealed to the owners of securities with a proposal to postpone payments for a couple of years, but did not find support. The holders of Eurobonds demanded to repay the obligations on the 2022 securities in full, and to pay interest on the 2024 bonds. In total, the company had to pay about $335 million in principal and €45 million in interest, according to Reuters.

The government of Ukraine, which the management of Naftogaz has assigned responsibility for the upcoming heating season, believes that the main thing for the company is to maintain liquidity. According to officials, the firm's attempt to close debts may cause concern among creditors of the state, whom Ukraine asks to wait with payments for several years. The Cabinet of Ministers considered that it would be strange if the authorities asked for a postponement, hoping for the freezing of public debts, and at this time private investors continue to receive payments.