DTEK to negotiate with banks on a standstill this week, Debtwire reports

Ukraine’s leading coal and power holding DTEK (DTEKUA) is going to hold meetings with its banking lenders in Amsterdam and Kyiv this week, Debtwire reported on April 5, citing its anonymous sources. The meetings will discuss a potential standstill agreement on DTEK’s banking facilities, the report said.

DTEK is not paying interest and principal on its debt, “with some minor exceptions,” since October 2015, the holding said in its annual accounts released on March 18. Its positive cash flow for 2016-1H17 is “crucially dependent on the willingness of the lenders to not demand repayment,” it stated. Last week, DTEK reported on the postponement of coupon payments on its Eurobonds (coupons for USD 38 mln were due last and this week) until it amends their payment schedule, which it will propose to bondholders “shortly”.

The holding’s total debt stood at UAH 57.9 bln (USD 2.41 bln) as of end-2015, including debt to banks at UAH 36.7 bln (USD 1.53 bln) and to Eurobond holders at UAH 21.2 bln (USD 0.88 bln).

Alexander Paraschiy: Ukrlandfarming, which preannounced a bond restructuring proposal the same day as DTEK did, was really fast with preparing its offer to bondholders. DTEK’s bondholders, instead, are waiting for a proposal more than a week. Debtwire’s report revealed the reason for the delay – DTEK is talking to banks this week. Hopefully, by the end of the week, DTEK will learn the position of its banking lenders and will be ready to prepare its offer to bondholders, hopefully next week.

Meanwhile, we remain optimistic about DTEK’s ability to generate cash flow in the mid-term, and we still believe DTEK’s bonds have potential to appreciate. Nevertheless, we do agree that in the short term, DTEK will need to get some concessions from its debt holders to solve its liquidity issues, which resulted in the decline of its operating profit and worsened payment discipline from Ukraine’s wholesale market.