6 August 2014
Cabinet of Ministers ordered to increase charter fund of Naftogaz (NAFTO) by UAH 63.27 bln, according to an Aug. 4 decree made public the next day. The government’s contribution to the company’s equity, as usual, will be done in the form of government bonds. The local currency bonds will be issued for up to 10 years and will have a coupon rate of up to 14.3%. The Cabinet also ordered Naftogaz to use part of the proceeds from the bond sale to buy U.S. dollars for USD 3.1 bln and deposit the funds in a special account at the central bank. The use of money from this account will be determined by separate government rulings.
Alexander Paraschiy: With its decree, the government has reserved enough funds for Naftogaz to smoothly repay its USD 1.6 bln Eurobond maturing in late September. The use of the rest of the USD 1.5 bln of foreign currency that Naftogaz has been ordered to purchase is not clear at the moment. We believe the funds might be used to repay the company’s other debts that have a state guarantee (including loans from local banks and from Russian Gazprombank). Naftogaz’s need to purchase U.S. dollars is unlikely to have any effect on the ForEx market, as we expect the currency will be purchased by the company directly from the central bank.