DTEK Energy plans annual eurobond buybacks of up to $100 mln, seeks changes to bond terms
Ukraine's largest private energy holding, DTEK Energy, has approached the holders of its eurobonds maturing in 2027 with a proposal to revise the current limited payment provisions and formalize a commitment to conduct annual bond buybacks of up to $100 million.
"The Group intends to continue its debt reduction strategy and is proposing the inclusion of additional issuer commitments to reduce debt," DTEK Energy stated in its consent solicitation published on the Irish Stock Exchange on Monday. As an incentive, the company is offering bondholders a 1% consent fee based on the nominal value of their bonds.
DTEK Energy clarified that outstanding bonds currently amount to $930.91 million in nominal value, out of a total issuance of $1.46687 billion.
Despite the challenges and disruptions caused by the war in Ukraine, the company has proactively reduced its nominal debt by approximately 47%, or $750 million, since the start of the war. This has been achieved through a combination of semiannual amortization payments of $8-10 million, a November 2022 bond buyback in accordance with the indenture, and voluntary Dutch auction buyback offers in December 2022, March 2023, and October 2023, along with other market purchases.
"As of the date of the Consent Solicitation, the Group's outstanding debt stands at approximately $931 million," the document states.
According to DTEK, its ability to continue implementing its debt reduction strategy hinges on existing restrictions imposed by the National Bank of Ukraine (NBU), specifically the ability of the Group's Ukrainian subsidiaries to provide foreign currency to the issuer – DTEK Energy B.V. – in the required volumes.
Under the proposal to bondholders, the company would be required to reserve any unused portion of the annual $100 million debt reduction commitment in a separate account in Ukraine, with limited options for short-term investments using those funds.
Additionally, DTEK Energy is seeking to amend its covenant package to enhance the company's investment appeal and increase its financial and operational flexibility for strategic investments. These amendments would include lifting restrictions on future business lines and raising thresholds for requiring independent valuations and bondholder approvals.
"DTEK Energy's operational and strategic vision is to continue supporting Ukraine's energy system by generating as much electricity as needed to meet national demand, while also providing balancing and other ancillary services. In line with this vision, the holding is continuing its campaign to repair or replace damaged or outdated equipment, which requires substantial capital investments," the document read.
Bond buybacks may be executed through tender offers or private transactions, in one or more tranches. Any remaining headroom under the NBU limit will be used for buybacks at par in conjunction with the scheduled semiannual amortization of $10 million.
Bondholder responses will be accepted through May 26, 2025.