Ukrtelecom asks to delay Credit Suisse, Deutsche Bank payment

Ukrtelecom (UX: UTLM UK) requested Credit Suisse First and Deutsche Bank allow it to delay 75% of its next payment on loans by at least three months. According to local media reports, Ukrtelecom plans to pay USD 13.9 mln of USD 55.6 mln due on February 25 and made the request due to lack of funds and unwillingness to attract more expensive short-term loans to make the payment. Ukrtelecom attracted the Credit Suisse First and Deutsche Bank loan of USD 500 mln in 2005. Yegor Samusenko: According to its debt-repayment schedule on the Credit Suisse First and Deutsche Bank loan, Ukrtelecom pays interest and principal twice a year: in the first and third quarters. We think Ukrtelecom would be successful in negotiating for the change to its debt-repayment schedule, because in the similar case of state-monopoly Ukrzaliznytsya 66% of debt-holders already voted in favor of restructuring. Moreover, we view current Ukrtelecom’s request to delay payment as a desire to have a more smooth quarterly payment schedule rather than an indicator of inability to pay the loan, because the company is able to attract more expensive short-term debt from a local bank if creditors do not agree to delay its next payment. In our view, the company’s leverage is quite adequate: total debt to equity ratio for Ukrtelecom is 0.7 vs. 1.9-2 for France Telecom and Deutsche Telekom. We do not expect this news to affect Ukrtelecom stock.