Privatbank asks for an interim 10-week extension of its 2015 notes

Ukraine’s biggest financial institution Privatbank (PRBANK) is offering holders of its USD 200 mln Eurobond maturing on Sep. 23, 2015 to agree to its maturity extension to Dec. 1, 2015, according to a launch announcement published on July 29. All the other bond parameters (including its coupon rate of 9.375%) will remain unchanged. The bank has scheduled a bondholder meeting for Aug. 13 to approve the extension.

The extension is essential for the bank to acquire some more time to agree on the restructuring parameters of the 2015 notes and the USD 150 mln in subordinated notes maturing in February 2016. It may need “a considerable amount of time” as the bank is required to agree on the parameters of both bonds’ restructuring with not only holders, but also Ukraine’s central bank (NBU) and the IMF, the announcement said.

Recall, the bank initiated the restructuring of its 2015 and 2016 notes on June 26. To complete the restructuring of each bond, the holders of both notes should have simultaneously accepted the offers at their July 13 meetings. This failed to happen as only the holders of the 2015 notes accepted their offer, but the holders of the 2016 notes (who were offered less generous restructuring conditions) rejected theirs. 

Alexander Paraschiy: It’s apparent from the bank’s announcement that the NBU and IMF are the parties with whom Privatbank has to review all its restructuring parameters. The involvement of so many parties in the restructuring (in which the bank seems to be not much of a decision maker at all) indeed greatly complicates the process.

The maturity extension offer for the holders of 2015 notes, who had already accepted a first round of restructuring terms, is not a good signal for them. It means the bank (or its supervisors) is still going to offer simultaneous restructuring of the 2015 and 2016 notes. Naturally, the bank may have to improve the restructuring parameters of its 2016 bonds (as the previous  parameters were rejected) at the cost of worsening of previous restructuring conditions for the 2015 notes.

That said, we do not see any reason for the holders of 2015 notes – who are the hostages of disagreements between the NBU/IMF and the holders of the bank’s 2016 notes – to approve Privatbank’s latest maturity extension proposal.