DTEK offers 10.75% coupon, maturity in 2024 for restructured notes

Ukraine’s leading coal & power holding DTEK Energy (DTEKUA) issued its official Eurobonds restructuring proposal on Nov. 18. According to its practice statement letter, it offers to issue a single bond instead of the current two issues, at a coupon rate of 10.75%, paid quarterly. The cash coupon rate will be 5.5% in 2017-2018, 6.5% in 2019, 7.5% in 2020, 8.5% in 2021, 9.5% in 2022-2023 and 10.75% in 2024. The unpaid amount will be capitalized and bear interest.

The repayment of the notes will be in two equal installments in late 2023 and late 2024. DTEK also will be allowed to redeem the notes before maturity at a price equal to 105.375% of the principal amount before end-2019, 104.031% in 2020, 102.688% in 2021 and 100% in 2022-2024. DTEK also offers a restructuring fee of 0.75% for the holders.

The holding also offers CapEx limits for 2017-2024 in the amount of USD 215 mln-USD 344 mln, as well as limits on dividends and increasing debt.

The High Court of Justice of England and Wales will consider on Dec. 2 permission for DTEK to convene a scheme meeting to approve the deal. Meanwhile, DTEK is offering the bondholders a new lock up agreement that will be valid until the restructuring is completed. It offers a 0.5% lock up fee for those who will sign a lock up agreement by a Dec. 1 deadline, as well as a vote in favor of the scheme afterwards. DTEK also reported that 33% of holders of the notes have already signed the lock up agreement.

Alexander Paraschiy: The offered restructuring parameters are better than what was earlier proposed and presented by DTEK Energy, so we expect bondholders will approve them as soon the court sanctions them. The offered bond payment schedule implies a net present value of the notes of 90.2%, 82.8% and 78.3% of par, at discount rates of 12.5%, 14.0% and 15.0%, respectively. We believe the current prices of DTEKUA bonds (about 78-79% of par) offer a good upside potential.