Oil Report

Ukraine throws $2.4 bln lifeline to Naftogaz

KIEV, Jan 4 (Reuters) - Ukraine has thrown a $2.4 billion lifeline to state energy firm Naftogaz, which analysts say is in technical default on a $500 million Eurobond, a state budget summary published on Friday showed.

“It is stated that in 2008 a state guarantee is offered by the government ... if needed under the obligations of Naftogaz on foreign loans taken before Jan. 1 2008, of an amount (equivalent to) the loans but no more than 12 billion hryvnias,” parliament newspaper Holos Ukrainy cites the budget as saying.

The country’s new prime minister, Yulia Tymoshenko, described the company on Wednesday as facing bankruptcy after years of mismanagement.

Analysts have long been concerned that Naftogaz’ financial health has been deteriorating as Russia raised gas prices and a transit intermediary between the two countries, RosUkrEnergo, was established.

They said earlier this week Naftogaz was in default on its Eurobond UA020207868= due in 2009, after failing to provide audited financial accounts for 2006 to bondholders within a Dec. 31 2007 deadline.

Although Naftogaz has made no official comment on the bond, its new head, Oleh Dubyn, was appointed by Tymoshenko last month and he agreed with her assessment of the company’s situation which she made after their first meeting on Wednesday. Some analysts said should Naftogaz default on this bond, clauses in other debts would force it to pay out $2.5 billion all in all -- a figure similar to the sovereign guarantee. 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 Tymoshenko said on Dec. 18 that the government would “put Naftogaz back on a normal financial footing”. ($=5.05 hryvnias) (Writing by Sabina Zawadzki; Editing by David Holmes)