Ukrzaliznytsia bondholders approve cross-default waiver till 2018

Ukraine’s railway monopoly Ukrzaliznytsia (RAILUA) reported on Dec. 7 that more than 93% of the holders of its Eurobonds agreed at a vote that day to extend a cross-default waiver by end-2017. In February 2016, bondholders gave time for Ukrzaliznytsia to restructure all its local debt by mid-September, while so far the company has only managed to restructure 39% of its USD 918 mln in total debt to local banks.

The company is planning to agree on restructuring 42% of its local debt by end-2017. 19% of the local debt of Ukrzaliznytsia, which is debt of Donetska Railway, won’t be restructured until the company regains access to its assets on the occupied territories of Donbas. With the Dec. 7 vote, bondholders agreed to carve out this debt from the scope of the cross-default provisions.

The bondholders voted in favor of terms proposed by a Dec. 5 deadline and will a receive 0.5% consent fee. The company has yet to report on a payment date.

Alexander Paraschiy: Approval of cross-default waiver is a logical event that enables most bondholders to gain an additional fee from the company. We do not rule out that the company will ask for another waiver in one year, given that talks with local banks are going slowly. Our neutral/skeptical view of RAILUA bonds remains, given the company’s high CapEx appetite that exceeds its ability to generate cash from its operations.