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27 Jul, 2022 10:27

Ukrainian energy giant defaults on debt

Naftogaz has failed to make payments on its Eurobonds
Ukrainian energy giant defaults on debt

Ukraine’s state-run energy company Naftogaz has defaulted on its foreign debt, the firm announced on Tuesday.

Naftogaz was unable to make payments on Eurobonds before a grace period expired, the company said a statement on Telegram, adding that it “has not received consent from the cabinet of ministers of Ukraine to make the necessary payments".

The Ukrainian government earlier prohibited payments, due on July 19, on its Eurobonds maturing in 2022 and 2024, citing the country’s need to accumulate natural gas in sufficient quantities before the upcoming heating season.

Naftogaz claims it had sufficient funds to carry out payments on its Eurobonds, and that it warned the government of “the risks and negative consequences for Naftogaz and the country” of a possible “hard default.” However, according to the firm’s Telegram statement, the government’s effective “ban” on payment means that “the government defaulted on Eurobonds of Naftogaz”.

Earlier this month the energy giant requested a two-year debt payment freeze from its international creditors, citing a “significant economic and business decline in Ukraine” caused by the ongoing conflict with Russia. The request was reportedly rejected. Naftogaz has a $335 million bond issue that matured on July 19, as well as two interest payments that were due on the same date. The proposal sparked fears that the company, and the government, were about to default on their debts.

Naftogaz is Ukraine’s largest state-owned oil and gas company and a major source of income, accounting for almost 17% of the country’s budget revenue last year.

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