DTEK aims to complete debt talks by end-2016

Ukraine’s top coal and power producer DTEK Energy (DTEKUA) is in continuous dialogue with the holders of its Eurobonds and banks with the goal of “balancing the company’s financial capability to service debt,” the company website reported on March 11, citing Dmytro Fedotov, the head of its corporate finance department.

The current situation in the Ukrainian economy and the energy sector has forced DTEK “to seek solutions on long-term debt restructuring and to count on the understanding and support of investors,” Fedotov said. “We hope to complete the negotiating process in 2016.”

A day before, Fitch Ratings downgraded the long-term issuer default rating of DTEK to “restricted default,” while keeping the rating of DTEK’s Eurobonds at “C”. At the same time, Fitch warned that DTEK is already in arrears on repayment of debt, which is “quite close to” USD 50 mln, the amount that triggers cross-default on Eurobonds.

Alexander Paraschiy: A new postponement of the deadline to reach a debt solution (the first one was end-3Q15, another one was end-2015) suggests the negotiations are tough. This confirms our expectations that DTEK will be the next after Metinvest (controlled by the same shareholder) to complete its debt talks. Recall, the deadline for Metinvest to complete its talks with Eurobond holders is May 27. Given DTEK’s greater uncertainty in its restructuring process, we believe the discount of its Eurobonds to Metinvest’s bonds is fair.