Creditors push back latest DTEK Energy restructuring proposal, media report

The creditors of coal and electricity holding DTEK
Energy (DTEKUA)  “are pushing back on almost all of the company’s proposed
restructuring terms,” Reorg Research, a distressed debt information provider,
reported on July 28, citing its anonymous sources. Of particular concern is
DTEK Energy’s plan to extend the ultimate maturity of its loans to related DTEK
Oil & Gas till 2030 (from 2024, as has been scheduled). Creditors view such
an extension “as unnecessary,” Reorg reported. As of end-2019, loans due from
DTEK Oil & Gas amounted to USD 487 mln, which is 25% of DTEK Energy’s total
financial debt and 36% of Eurobonds outstanding.

Last week, DTEK Energy offered to cut the coupon rate
on its existing Eurobonds to 6.56% (from 10.75%) and extend the ultimate
maturity of the bond from 2024 to 2030 (with the possibility of a partial repurchase
of bonds from own cash flow and a recovery of DTEK Oil & Gas loans). The
company is offering to direct all the free cash flow to interest and debt
repayments “subject to the minimum liquidity requirement of USD 50 mln.” Some
creditors think that such a payment structure “is too loose” and are pushing
for a firm amortization schedule instead, Reorg reported. It also wrote that
some creditors were also discussing the idea of DTEK B.V., the parent company
of DTEK Energy, becoming the guarantor under new debts, though it was rejected
by the company.

Alexander Paraschiy: DTEK’s
offered “loose” payment structure is a general reflection of the company’s
uncertainty about the conditions of Ukraine’s energy market, whose reform
(launched a year ago) only added imbalances and unknowns. Therefore, it looks
like the company is not able to offer any more concrete schedule of interest
payments and amortization. Given that such unclear conditions are not
acceptable to creditors, a possible way out of the situation is to agree to
some interim conditions of debt servicing with a return to a more concrete
schedule after the situation on Ukraine’s wholesale electricity market becomes
more clarified.

Meanwhile, we agree with the position of
bondholders that DTEK Energy should do its best to recover its lending to DTEK
Oil & Gas earlier than scheduled (rather than later, as has been offered by
the company).