9 February 2021
Ukraine’s leading coal and power producer DTEK Energy
reported on Feb. 8 it had agreed on key terms of debt restructuring with ad hoc
committees of bondholders and creditors.
As part of the deal, DTEK Energy will appoint an
independent supervisory board member (out of at least three candidates offered
by creditors) who will have a veto right on M&A, large transaction with
related parties and excess CapEx, as well as on paying PIK interest since 2022.
Based on the announced terms, existing obligations of
DTEK Energy (par value of its debt and accrued unpaid interest with contractual
rate until the end of January 2021 and 5% for February-April 2021) will be
covered by the company itself and its related company DTEK Oil & Gas.
DTEK Oil & Gas will issue USD 425 mln notes
maturing at the end of 2026 with a coupon rate of 6.75%. The notes will
amortize by USD 50 mln annually starting December 2023. Upon the company’s
choice, the note can amortize by additional USD 50 mln annually.
DTEK Energy’s subsidiary DTEK Finance will issue new
notes in exchange of existing notes and loans. The new notes will mature at the
end of 2027 and will amortize by USD 10 mln semi-annually starting June 2022.
The notes will bear interest rate of 5% by the end of January 2022, of which no
more than 3.5% can be paid in PIK upon the company’s choice. Since January
2022, the coupon rate is offered at 7%, paying quarterly. In any four
non-consecutive quarters, the company might choose to pay part of the coupon in
PIK (provided that the independent board member does not object, at least 3.5%
will be paid in cash and the total coupon rate for such quarter will be
increased to 7.5%). Such PIKed coupons will be repaid at the first possible
opportunity from the company’s excess cash. Also, DTEK Energy will use any
excess cash (over the average USD 50 mln during the semi-annual period) to
purchase its bonds on the market and (if any cash remains after the purchase)
redeem them at par.
Creditors who will support the restructuring will also
receive a consent fee of 2% of the principal amount of the new DTEK Energy
notes.
Alexander Paraschiy: The updated
DTEK’s offer provides more clarity about minimum payments to bondholders (as
compared to the November offer), thus
having secured the minimal value of existing bonds (in NPV terms based on
10.75% discount rate) at about 83% of par, we estimate. This is more than the
current price of DTEKUA notes (about 72% of par). Though the maximum value of
the bonds is also limited (at about 88% of par, we estimate), the updated
restructuring terms look balanced.