Companies@UA: База компаний Украины

Kyiv, July 31 (Interfax-Ukraine) – There is a high risk that Kyiv-based Ukrgasbank will refuse to buy back its C Series bonds in a scheduled buyback offer, and the terms for the debt restructuring do not satisfy the requirements most of its investors, according to market players polled by Interfax-Ukraine.

The experts from Kyiv-based Sokrat Investment Company forecast that the situation with the C Series bond issue would be similar to the situation with the A Series bond issue, which was partially restructured: The bank will refuse to buy back its bonds, proposing debt restructuring instead.

"At present, the bank has D and E Series bonds, apart from the above-mentioned A and C Series bonds, on which investors have the right to use a buy back offer in September and December 2009. We're sure that investors will claim their rights... Thus, the bank will have to pay for bonds worth UAH 600 million by the end of the year. Even taking into account that only part of the issue was placed on the market, the bank will hardly be able pay this sum," said an analyst from Sokrat Company, Mykhailo Salnikov.

In addition, the expert said that as the state owns over 84% of the shares in Ukrgasbank, and at present, the satisfaction of the claims of individuals is the top priority for the bank – the lifting of restrictions on the withdrawal of deposits from the bank is evidence of this.

Kyiv-based Concorde Capital said that D and E Series bonds have been bought back by the bank in full, while its C Series bonds, worth UAH 120 million out of the UAH 300 million issue, are floating on the market.

"The bank has loans worth some UAH 170 million that were not paid, including UAH 120 million for C Series bonds, UAH 40 million for A Series bonds and some UAH 10-20 million for B Series bonds," said the director of the consulting department at Concorde Capital, Andriy Herus.

He said that until August 3, 2009, when the buy back offer on the bonds is scheduled, it is too early to talk about default: talks with investors on debt restructuring are being held.

He said that C Series bond holders are being offered 20% of the sum of the buy back scheme, and the rest of the sum would be restructured for three years with a 17% interest rate.

Herus said that the very low interest rates and a long term are being proposed, which considerably differ from the debt restructuring deals struck by other local bonds.

A trader at Kyiv-based Troika Dialog Ukraine Investment company, Oleksandr Ublinskykh, said that the conditions for the debt restructuring proposed by the bank are the worst on the market.

Salnikov said that the majority of shareholders do not accept the current conditions, as they believe that the bank, which was recapitalized and has a statutory capital of UAH 3.8 billion, has the ability to propose more favorable conditions on the debt restructuring to investors.

Troika Dialog Ukraine said that some C Series bond holders would protect their interests in the courts.

"Sokrat forecasts the talks becoming tougher: investors would will a higher interest rate or the payment of a larger part of the nominal value.

The director of the investment department at Ukrgasbank, Yuriy Kamenetsky, recently said that agreements in principle on the debt restructuring were reached with large holders of Ukrgasbank's securities.

"Our creditors, seeing positive changes in the bank's operation and taking into account the situation on the financial market, believe that the banks' conditions on delivering on its commitments are acceptable. I think that in the near future the debt restructuring will be settled," he said.

As reported, Ukrgasbank failed to pay for A Series bonds under a buy back offer on July 17.

Concorde Capital said that the bank reached agreement with only with 10-20% of its investors, while other investors claimed their right to receive their funds back. The investment company said that investors were offered a 17% interest rate on A Series bonds.

Similar terms were proposed on Kreditprombank's bonds, and on average the down payment on the market is 15-30%, while the rest of the sum is paid within 0.5-1.5 years with 22-26% interest rates," reads a Concorde Capital release.

The experts from the investment company said that the key reason for the rejection of the debt restructuring on A Series bonds are the unattractive terms for the debt restructuring in the situation when investors understand that the bank is able to give more.

The company said that even state-run Ukreximbank did not agree on the debt restructuring for A Series bonds and was demanding payment.

Ukrgasbank was founded in 1993. Among its largest stockholders by April 1, 2009 were Financial and Investment Alliance Ltd. with 40.1975% and Ukrgazinvest Plus Ltd. with 19.0005%. In June, the government recapitalized the bank.

The bank ranked 17th among the 182 operating banks in Ukraine in terms of overall assets, estimated at UAH 12.496 billion, as of April 1, 2009, according to the National Bank of Ukraine.