Naftogaz recently had to have every transaction approved by the Ukrainian government. Now the Council of Ministers decides that the state-owned company may not repay several Eurobonds. The state is consolidating all resources “for priority needs,” says Prime Minister Schmyhal.
The state-owned Ukrainian gas company Naftogaz has declared default on servicing several euro bonds. The group has not received permission from the Cabinet of Ministers to repay the debt, Naftogaz said in a statement. However, there is enough money in the company accounts. Specifically, it is about the repayment of Eurobonds (and their interest) that are due this year and interest payments on Eurobonds with a maturity date of 2024.
Accordingly, payments in excess of a three-digit million amount in euros have failed. The “Financial Times” reported two weeks ago that Naftogaz had asked the holders of bonds worth almost 1.4 billion euros to defer payments.
Last Thursday, the Ukrainian government obliged the Naftogaz managers “due to unsatisfactory work” to obtain the approval of the Cabinet of Ministers for all processes. Naftogaz is one of the largest Ukrainian companies engaged in the extraction, processing and transportation of natural gas and oil.
It is the first default by a Ukrainian state-owned company since the Russian attack five months ago. With the road construction group Ukrawtodor and the electricity network operator Ukrenerho, two other state-owned companies have also asked for a payment delay of two years each.
“The state is now consolidating all existing resources on priority needs,” Prime Minister Denys Schmyhal wrote on Telegram. These are financing the army, preparing for the heating season, paying pensions and rebuilding critical infrastructure. Schmyhal estimated the payment amounts due at the equivalent of a good 1.5 billion euros.
As the German Press Agency learned from Ukrainian government circles, a budget deficit of around 30 to 34 billion euros is expected there for the current year. In the President’s office, the equivalent of around 49 billion euros was recently mentioned. Before the war broke out, Kyiv had planned total government spending equivalent to just 37 billion euros.