Fitch downgrades DTEK long-term rating to “RD”, keeps bonds at “C”

Fitch Ratings has downgraded its long-term issuer default rating of DTEK Energy to “RD” from “C”, the agency reported on March 10. At the same time, Fitch kept the rating of DTEK’s Eurobonds (DTEKUA) at “C” level.

The grace period has expired for most of DTEK’s bank loans worth about UAH 14.3 bln, which were due in end-February, according to Fitch. DTEK has defaulted on loans in an amount “quite close to” USD 50 mln, which is a threshold under DTEK’s Eurobond cross-default clause, the agency said. Fitch expects this threshold will be reached “in the coming months”.

DTEK’s cash position on Feb. 1 was UAH 937 mln, which is way below UAH 25 bln of debt that is due in 2016, Fitch reported. About 40% of cash and equivalents were placed in domestic banks, and “a significant portion of cash” is kept in the accounts of related First Ukrainian International Bank (PUMBUZ), according to the agency. DTEK intends to negotiate rescheduling its bank loan maturities and Eurobonds within several months, Fitch reported.

Alexander Paraschiy: DTEK’s weak finances come as little surprise as the holding earlier announced its intention to negotiate restructuring all its debt obligations. At this stage, apparently, the restructuring talks with banks haven’t concluded. With regards to DTEK’s Eurobonds, repayments on which are scheduled for Sept.’17 – Apr.’18, the holding still has enough time to initiate talks. We expect in its talks to restructure its Eurobonds, DTEK will use the experience of its related holding Metinvest, which has reached a more active stage of Eurobond restructuring. DTEK bonds trade currently at about 40% of par, or at a discount to Metinvest bonds (trading at 43% of par). The discount looks fair at this stage.