Naftogaz faces ‘restricted default’ today

Naftogaz faces what Fitch Ratings termed a ‘restricted default’ today with redemption of its USD 500 mln Eurobond due today and a proposed timetable to swap the bonds for new ones that does not provide for an agreement to be reached with bondholders in time. According to Reuters, the Naftogaz bond prospectus appeared to allow for a 30-day grace period to remedy failures to meet obligations. A group of bondholders has already publicly stated their intentions to seek to declare Naftogaz in default if it fails to make payment today and fight restructuring plans. Naftogaz, in a statement published on its website last week, said it was offering holders of its USD 500 mln Eurobond an exchange for new US dollar-denominated bonds backed by a sovereign guarantee that mature in September 2014 and carry a coupon of 9.5%. October 8 is the early participation deadline for bondholders to vote in favor of restructuring; October 15 is the final voting deadline; and a noteholder meeting is scheduled for October 19.