UZ gets restructuring consent for UAH 17 bln in internal debt

Обзоры по компаниям и отраслям 14.07.2015 Ukrainian railway monopoly Ukrzaliznytsia (UZ, RAILUA) agreed upon a restructurization with the holders of nearly UAH 17 bln of its domestic debt, the company reported on July 13. This is nearly 82% of all the local debt that UZ is aiming to restructure (about UAH 21 bln). UZ stressed this is just the first step towards restructuring its debt. Recall, UZ reported a default to domestic lenders on May 12, having initiated a global restructuring of its liabilities. After it’s able to restructure its domestic debt, it will aim to start restructuring talks with the holders of its Eurobonds (USD 500 mln outstanding), the company said. As of the latest reporting date (end-1H14), UZ had UAH 29.0 bln in debt liabilities, including just UAH 6.4 bln denominated in the local currency. At the current exchange rate of UAH 22/USD, that debt obligation translates into UAH 48 bln. 39% of the entity’s debt obligations (equivalent to UAH 11.2 bln, as of end-1H14) were held by banks with Russian ownership, according to the UZ report. The largest portion of loans from Russian banks (most likely, disbursed by their Ukrainian subsidiaries) was denominated in dollars, we estimate. Ukraine’s state banks held just UAH 0.7 bln in UZ debt (as of end-1H14) and this portion is not subject to restructuring, according to the entity. Alexander Paraschiy: Based on Ukrzaliznytsia’s debt structure, we see the entity was able to agree on debt restructuring with the local subsidiaries of Russian banks. Some local banks seem to have rejected UZ’s restructuring offer, meaning the completion of its local debt operation might take some more months. This means UZ is still not ready to prepare any offer to the holders of its Eurobonds. The entity has a lot of time for that, given that the nearest payment on RAILUA notes is scheduled for late November 2015. We remain conservative on UZ Eurobonds, expecting the entity will hardly offer better restructuring conditions for its bondholders than what the Ukrainian government intends to do for its international