Concerns Raised by Ad Hoc Group Regarding Ukrenergo's Debt Restructuring Proposal
On February 10, 2025, the Ad Hoc Group of holders of Notes issued by the National Power Company Ukrenergo ("the Company") raised significant objections to the Company's recent proposal regarding debt restructuring. The Ad Hoc Group, which is represented by the legal firm Cleary Gottlieb Steen & Hamilton LLP, emphasizes that the current proposal lacks the necessary support from the majority of Noteholders and fails to establish a credible framework for engagement.
The Ad Hoc Group's analysis indicates that the restructuring request from the Company needs to be viewed through several critical lenses. Historically, Ukrainian state-owned enterprises have not experienced debt haircuts, and instances of debt restructuring have typically been based on commercial relationships and the entity's financial capabilities. In this context, imposing a haircut on Noteholders would indeed be unprecedented and unjustified, especially when considering the sovereign guarantee that enhances the creditworthiness of the bonds.
Furthermore, the Ad Hoc Group asserts that Ukrenergo is in a favorable financial situation, being liquid and solvent, which means that it has the ability to honor its obligations to pay on the Notes. This sentiment is reinforced by the fact that the holders of these Notes have already shown flexibility by agreeing to suspend coupon payments until November 2024—this support provided far exceeds the concessions made by other creditors who hold pari passu claims.
With this backdrop, the Ad Hoc Group urges the Company to engage in comprehensive negotiations with all creditors and to adopt a unified approach rather than treating different creditor groups in isolation. The Group expresses particular concern over the issuance of Green Bonds, which were intended to settle overdue obligations to renewable energy producers, and which should be honored in the spirit of their intended purpose.
However, the Ad Hoc Group remains open to constructive dialogue and has provided a term sheet outlining a more acceptable pathway for negotiations. Key proposals include immediate full payment of past due interest on the Notes and options for partial paydown or additional security mechanisms to bolster creditor assurances.
Despite these challenges, the Ad Hoc Group believes that with proper engagement based on the outlined principles, a viable and mutually agreeable resolution to the restructuring issues may be achievable.
The Ad Hoc Group's analysis indicates that the restructuring request from the Company needs to be viewed through several critical lenses. Historically, Ukrainian state-owned enterprises have not experienced debt haircuts, and instances of debt restructuring have typically been based on commercial relationships and the entity's financial capabilities. In this context, imposing a haircut on Noteholders would indeed be unprecedented and unjustified, especially when considering the sovereign guarantee that enhances the creditworthiness of the bonds.
Furthermore, the Ad Hoc Group asserts that Ukrenergo is in a favorable financial situation, being liquid and solvent, which means that it has the ability to honor its obligations to pay on the Notes. This sentiment is reinforced by the fact that the holders of these Notes have already shown flexibility by agreeing to suspend coupon payments until November 2024—this support provided far exceeds the concessions made by other creditors who hold pari passu claims.
With this backdrop, the Ad Hoc Group urges the Company to engage in comprehensive negotiations with all creditors and to adopt a unified approach rather than treating different creditor groups in isolation. The Group expresses particular concern over the issuance of Green Bonds, which were intended to settle overdue obligations to renewable energy producers, and which should be honored in the spirit of their intended purpose.
However, the Ad Hoc Group remains open to constructive dialogue and has provided a term sheet outlining a more acceptable pathway for negotiations. Key proposals include immediate full payment of past due interest on the Notes and options for partial paydown or additional security mechanisms to bolster creditor assurances.
Despite these challenges, the Ad Hoc Group believes that with proper engagement based on the outlined principles, a viable and mutually agreeable resolution to the restructuring issues may be achievable.
Topics Financial Services & Investing）
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