The State Railway Administration (Ukrzaliznytsia) has declared a technical default on its debts. Ukrzaliznytsia’s acting General Director Maksym Blank announced this at a press conference, the CFTS correspondent reports.
"Today, we notified our creditors of a technical default on certain debt obligations and notified internal and external creditors of the areas and volumes of restructuring that Ukrzaliznytsia plans to implement in 2015," said Blank.
Blank was talking about almost all of Ukrzaliznytsia’s domestic commercial debt (which amounts to UAH 22 billion) and its external debt on Eurobonds (UAH 10 billion). Its total debt amounts to UAH 37 billion, of which UAH 32 billion will be restructured. According to Blank, Ukrzaliznytsia’s debt of UAH 5 billion to the European Bank for Reconstruction and Development and the Ukrainian Export-Import Bank (Ukreximbank) is not subject to restructuring.
Debt-restructuring negotiations will take place in the next two months. According to Blank, 35% of Ukrzaliznytsia’s external debt is held by Russian banks.
As noted in a press release by Ukrzaliznytsia, the railway enterprises under its control have failed to make payments to Ukrainian creditors under some bilateral credit agreements. "Such cases of default have led to cross-default on some other loans, including bonds worth USD 500 million issued by Shortline Plc with a yield rate of 9.5% and maturing in 2018," the press release states.
As reported, Ukrzaliznytsia debuted a five-year Eurobond worth a total of USD 500 million on the Irish Stock Exchange on 15 May 2013 at the interest rate of 9.5% per annum. The securities were issued with the main purpose of raising funds without collateral and state guarantees. The money was intended for financing capital expenditure programs and refinancing a short-term loan portfolio. The Ukrzaliznytsia bonds were acquired by investment funds (68%), banks (25%), and hedge funds (6%). The structure of the holders of the securities of the Ukrzaliznytsia bonds may have changed since then because they are in free circulation on the market.
Ukrzaliznytsia pays coupons on the bonds every six months. The first coupon payment was made on 18 November 2013, the second on 16 May 2014, and the third on 19 November 2014.
In a presentation to creditors at a meeting in Washington on 18 April, the Ministry of Finance said that the restructuring of Eurobonds issued by Ukrzaliznytsia, just like Eurobonds issued by Ukreximbank and the State Savings Bank (Oschadbank), would involve only prolongation of their maturity dates without reduction of the coupons and the principal.
In addition to Eurobonds denominated in dollars, Ukrzaliznytsia also placed domestic bonds denominated in hryvnia.