DTEK Energy completes USD 2 bln debt restructuring

Ukraine’s leading coal and power holding DTEK Energy
(DTEKUA) completed the restructuring of “substantially all” of its indebtedness
on May 17, it reported on the same day. In the process of the restructuring of
its Eurobond and most of its banking debt, the company exchanged a total of USD
2.09 bln, for new Eurobonds of DTEK Energy (par value USD 1645 mln) maturing in
2027 and Eurobonds of DTEK Oil & Gas (USD 425 mln) maturing in 2026.

DTEK Oil & Gas notes mature at the end of 2026 and
have a coupon rate of 6.75%. The notes will be amortized by USD 50 mln annually
starting December 2023. Upon the company’s choice, the notes can be amortized
by an additional USD 50 mln annually.

DTEK Energy’s new notes will mature at the end of 2027
and will be amortized by USD 10 mln semi-annually starting in June 2022. The
notes will bear an 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. From January 2022,
the coupon rate will increase to 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%
is paid in cash and the coupon rate for such a quarter is 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.

Alexander Paraschiy: With the
restructuring, DTEK Energy decreased its effective cost of debt as well as
secured some period of low cash interest rates (2021 and some periods in the
future). This will allow the company to get through temporary hardships from
possible inefficiencies in Ukraine’s energy market which may arise in the
future as the new market model is far from being matured. A trend for increase
of achieved electricity prices in Ukraine (on day-ahead and intraday markets,
price is 11% higher yoy in 4M21) promises that the company won’t have to
initiate a new debt restructuring in the coming year or two. All in all, we see
the company’s debt restructuring as efficient and balanced.