Ukrnafta board approves the start of tax debt restructuring

The supervisory board of oil giant Ukrnafta (UNAF UK) approved management’s proposal to prepare long-term restructuring of tax debt, according to the company’s May 24 press release. The restructuring plan will have to be approved by the company’s shareholders at their meeting scheduled for July 7. The company provided no details on the restructuring. As of end-March 2016, its total debt to the state was UAH 10.05 bln. Recall, the proposal to restructure the tax debt was voiced by the company’s CEO in March 2016.

On top of that, the board approved Ukrnafta’s 2015 annual results, in which net revenue increased 3.1% yoy to UAH 28.75 bln, while EBITDA turned to negative UAH 1.21 bln (from positive UAH 4.56 bln in 2014). The result was affected by an increase in “other operating costs” by 61% yoy to UAH 19.29 bln. The company’s bottom line was negative at UAH 5.44 bln in 2015 (vs. net profit of UAH 1.27 bln in 2014).

Alexander Paraschiy: The board’s decision improves the chances that Ukrnafta will remain a going concern, and thus may cause some appreciation of Ukrnafta stock in the coming days. At the same time, this is only the start of a restructuring process that can be halted at any time. More certainty will only appear after the shareholder meeting, where the state (holding a 50% stake in the company) will have to adopt a final decision on whether to allow the restructuring. Most likely, the details on the restructuring will be discussed by management, supervisory board and the main shareholders of Ukrnafta up until the AGM scheduled for July. Moreover, there is a risk that the scheduled AGM will be postponed if the parties don’t find a common solution by that time.