Cabinet of Ministers orders restructuring of Naftogaz debt

The Cabinet of Ministers, in a July 22 order, requested Naftogaz of Ukraine and the Finance Ministry restructure the debts of Naftogaz and lower its costs for servicing its loans via refinancing. The order provides Naftogaz to levy fines for late gas payments to it, stipulates the payout of dividends by Naftogaz subsidiaries Ukrgaz-Energo and Ukrnafta (UNAF) in 2006-2008, and settling Naftogaz’ accounts payable. Andriy Gerus: Taking into account Naftogaz’ financial conditions, we expect that the company will restructure its Eurobonds at least for 3-5 years. At the same time, we do not expect a substantial increase in the coupon rate as government and Naftogaz are trying to lower the company’s debt servicing costs. Additionally, we see a low probability that Naftogaz will receive dividends from Ukrgaz-Energo and Ukrnafta, each of which Naftogaz owns 50% stakes in.