DTEK offers better bond restructuring parameters, report says

Ukraine’s leading utility holding DTEK Energy (DTEKUA) has agreed with its bondholder committee new restructuring terms, as reported on Oct. 26 by Reorg Research, a distressed debt research and news agency. Based on its information, DTEK will merge its two Eurobonds into a single issue paying a coupon of 10.5%, an increase from rates of 10.375% and 7.875% for the existing bonds.

The cash coupon will start at 5.5% in 2017 (the rest to be paid in PIK) and will gradually rise to 9.5% in 2022-23, and to 10.5% in 2024. No interest in KIPa mount will be applied, as we understand. The bond’s ultimate maturity will be extended to the end of 2024. Half of the par value will amortize till the end of 2023 and another half will be repaid at maturity. The restructuring fee of the Eurobonds may reach 1%.

Recall, Reorg Research reported last month that DTEK was trying to offer a maturity extension till end-2023 (with most of the principal repaying at maturity) and a coupon rate of 8% with its cash component starting from 4.0% in 2017. That idea was rejected by the bondholders.

Alexander Paraschiy: We did not see any official confirmation from DTEK on the above-listed restructuring terms, but we believe they could be realistic. They imply DTEKUA bonds’ NPV of 73%-75% of par value, assuming a 15% discount rate that we usually apply. If we apply a 12% discount rate – which is close to the YTM of Eurobonds of PUMB, related to DTEK –  we would get an NPV close to 86%-88% of par. The latter suggests some growth potential as compared to the current price of DTEKUA bonds, which are currently about 77%-79% of par.