Ukrainian Railways gets May Sberbank loan restructured

State monopoly Ukrainian Railways (RAILUA) reported on
May 27 that it had reached an agreement with Sberbank-Ukraine on the
rescheduling of the debt that was due in late May. The new loan terms imply the
postponement of most of the May debt payments till the end of 2021 and a
gradual reduction of the interest rate. The deal will lead “to a significant
balancing of cash flows and liquidity” of the company, it commented.

The company relates the success of the new deal to the
constructive position of the lender as well as assistance from the central bank
and Finance Ministry. The company also revealed its intention and reserved its
right to refinance the loan in case it attracts funding on the international
debt market or from Ukrainian banks.

Recall, July 2020, Ukrainian Railways got restructured Sberbank loans for about USD 200 mln
(bearing 12% interest in dollars) that were due on July 31. Maturities under
the loans were rescheduled for up to three years, but most of the debt was due
in 2021 (about USD 153 mln). This includes a USD 116 mln payment in end-May, as
S&P Global Ratings reported in April.
S&P downgraded Ukrainian Railways’ rating by two notches (to CCC) on the
increased risk of default on this loan. It also promised to further downgrade
the company’s rating if it views the new deal with Sberbank as “a distressed
exchange” (i.e., if it gives the creditor less value than originally promised).

Alexander Paraschiy: As we
earlier expected, the company, with assistance from the government, was able to
resolve the debt issue and avoid a technical default. The key question is,
however, whether the announced restructuring parameters, including the “gradual
decrease of the interest rate,” fall under S&P’s definition of a distressed
restructuring which would lead to further rating downgrade by the agency. One
of the possible options for the company to avoid a further downgrade is the
refinancing of the Sberbank loan in the near future.