January 2, 2008 / 2:47 PM / 12 years ago

Naftogaz fails to meet deadline for audited results

LONDON, Jan 2 (Reuters) - Ukraine’s state-owned energy firm Naftogaz has failed to meet a Dec. 31 2007 deadline to provide audited 2006 financial results and is therefore in technical default, analysts familiar with the matter said on Wednesday.

Bondholders had in November extended the deadline for the information after the stricken company asked for “a waiver of possible default” on its $500 million Eurobond UA020207868= due 2009.

“Naftogaz are in technical default as they had to file their financials for 2006 by Dec. 31 2007 according to the extended period granted to them by bondholders. Now bondholders may ask the trustee, which is the Bank of New York, to serve them with an acceleration order,” said Bear Stearns analyst Okan Akin.

“If this happens some cross default clauses may also come into force and they may need to pay up to $2.5 billion on various debts,” Akin said.

Ukrainian Prime Minister Yulia Tymoshenko was quoted earlier by Interfax Ukraine as saying Naftgoaz is close to bankruptcy and a special government commission is to be created to deal with the issue.

Naftogaz was unavailable for comment as Ukraine is closed for Orthodox Christmas holidays.

Officials with the Bank of New York declined comment.

The Naftogaz 2009 bond has been yielding over 10 percent in recent weeks, about 370 basis points above Ukraine’s benchmark 2013 dollar bond. This is likely to spiral further as fully fledged trading gets underway next week.

Yields had touched a high over 16 percent early in December but eased after new Prime Minister Yulia Tymoshenko said on Dec. 18 that the government would “put Naftogaz back on a normal financial footing”.

“The Ukrainian government ... has pledged support for Naftogaz. Also there was no government in Ukraine for much of 2007 so I think creditors may be more understanding,” Akin said. Rating agency Moody’s last week placed the company’s Ba3 foreign currency rating on review for a downgrade, citing among others, the protracted delay in providing 2006 financial statements.

“Naftogaz is the cheapest quasi-sovereign in emerging markets,” said Commerzbank head of emerging debt Luis Costa. “Ultimately I think they will be backed by the state but the Ukrainian government is not sensitive to the market.”

“This problem will hit all other Ukrainian issues,” he said. (Reporting by Sujata Rao; Editing by Louise Ireland)

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