DTEK to issue bond restructuring proposal shortly, pays no coupons

Ukraine’s leading coal and power holding DTEK (DTEKUA) reported today it’s in the process of developing a restructuring proposal on its Eurobonds maturing in March and April 2018. The holding said it “expects to share the proposal with bondholders shortly” in its exchange announcement. DTEK also said it has not paid the coupon on one of its Eurobonds, due March 29, and will pay it “in accordance with the terms of the proposal.”

Alexander Paraschiy: The failed coupon is discouraging news for DTEK bondholders who were expecting DTEK would pay as long as it had not announced not paying before the due date. The missed coupon, of about USD 8.3 mln, wasn’t a big deal for DTEK, so there was some chance it would pay it. Now it’s clear that the coupon due next week, worth USD 29.5 mln, won’t be paid as well.

At this stage, it’s hard to predict exactly what proposal will be offered by DTEK soon. Clearly, DTEK will seek to postpone the repayment of its bigger and longer Eurobond (USD 750 mln, due April 2018), but could potentially offer a longer repayment schedule for the smaller one too (USD 160 mln repayable in Sept.’17 and Mar.’18). And most likely, the offer will contain a suggestion to partially capitalize the nearest coupons. A decrease in the par value of the bonds is unlikely, in our view.