Ukrainian energy firm Naftogaz said on Thursday it would offer holders of $500 million worth of Eurobonds maturing next week new sovereign-backed bonds with a coupon of 9.5 percent and a new maturity of five-years, according to Reuters.
Trading on the bond UA020207868= was earlier halted on Luxembourg`s Stock Exchange, which cited violation of its regulations.
Naftogaz, which has often been at the centre of rows between Ukraine and Russia over gas supply and prices, also said in a statement that bondholders deciding to participate in the offer after a deadline of Oct 8 would face a five percent exchange penalty.
"Naftogaz and the guarantor are taking steps that are intended to address the significant challenges that Naftogaz faces and to reduce Naftogaz` refinancing risk," the firm said in a statement.
The five-year Eurobond is part of Naftogaz` $1.6 billion external debt, which also includes bilateral loans, that Ukraine has said it wants to restructure.
Naftogaz said bondholders that agree to the restructuring after Oct 8 would receive new notes that amount to 95 percent of the new participation price, representing a 0.95 exchange ratio.
The company said it needed to secure consent from the bondholders to achieve a successful restructuring of its business model and permit it to meet its obligations to creditors while maintaining sufficient liquidity to continue operations.
Kiev has given Naftogaz until Oct. 20 to complete the bond restructuring -- nearly three weeks after the pay-out date -- a move that prompted Fitch Ratings to cut the utility`s issuer default ratings to `C` and warn that the firm would be in "restricted default" after Sept. 30. [ID:nLN627732]
"This is pretty much in line with market expectations," said Luis Costa, emerging market debt strategist at Commerzbank.
"The big difference is that there will be no cash upfront payments. We are talking of 150 basis points over the sovereign bond which is basically the level market is wiling to pay."