Ukrzaliznytsia in technical default on Eurobonds, will offer waiver

Ukraine’s railway monopoly Ukrzaliznytsia (UZ, RAILUA) reported on Sept. 19 it has failed to complete a restructuring of USD 242.5 mln in debt with local banks. It also reported that a six-month debt restructuring period, agreed upon with bondholders, expired on Sept. 15, which means the holders are eligible to demand cross acceleration of the bonds, worth USD 500 mln. Ukrzaliznytsia reported that it’s preparing a consent solicitation to bondholders to agree upon “certain waivers” related to the cross default.

Of the total amount of overdue loans, USD 69.4 mln is debt originally incurred by Donetska Railway, the entity operating in the partially occupied Donestk and Luhansk regions of Ukraine. Ukrzaliznytsia reports that its control over Donetska Railway has yet to be restored.

Ukrzaliznytsia also reported it paid USD 24.7 mln in coupons on the Eurobond on time (Sept. 15).

Alexander Paraschiy: The cross default on Eurobonds was an expected event – only its exact date was not clear to us. We do not expect significant consequences from the event, neither for Ukrzaliznytsia nor its bondholders.