Ukrainian state-run energy company Naftogaz Thursday outlined long-awaited proposals on the restructuring of a $500 million Eurobond maturing Sept. 30.
The company is offering bondholders a new state-guaranteed note, with a five-year maturity and 9.5% coupon. The current Eurobond has a 8.125% coupon.
The proposed terms have drawn mixed responses from market participants.
Rebel bondholder Alexey Olshansky, director of Corlblow Trade International Ltd., said he is satisfied in principle with the offer. But he added he is seeking clarity on whether Naftogaz will pay the last coupon on the current bond and also on how long the process of exchanging the notes will take, especially given that trading in the bonds has been suspended on the Luxembourg exchange.
Olshansky, who previously said he planned to block attempts by the Ukrainian company to restructure its debt, said Thursday he is in talks with other holders about the details of the offer.
Naftogaz is the key link in shipments of Russian gas to the European Union. Many investors have regarded Naftogaz debt as quasi-sovereign and held the paper as a proxy for state debt.
A meeting for noteholders will be held in London Oct. 19.
Yury Tulinov, a credit analyst at TRUST National Bank, said the proposals fail to provide investors with "adequate compensation" for the risks associated with the security and the extraordinary timing of these negotiations.
"Therefore, we recommend that investors do not agree to the proposition and try to negotiate with the company to achieve better terms," Tulinov said.
But Luis Costa, an emerging market debt strategist at Commerzbank in London, said the existence of a state guarantee is a major boost and could entice bondholders into agreeing the new terms.
"That is the key credit enhancement major bondholders were asking for, the key attribute in a potentially acceptable liability management deal," he said.
Earlier Thursday, the Luxembourg Stock Exchange suspended trading in Naftogaz's $500 million Eurobond, citing exchange regulation violation.
The Eurobond forms part of a $1.6 billion debt pile which Naftogaz is trying to restructure.