CIS Credit: Naftogaz breach of covenant & debt restructuring?

Naftogaz of Ukraine has actively been on the news recently after the company unveiled FY 2008 financials and announced the restructuring of its external debt. The company hired Credit Suisse as a consultant for the restructuring and Credit Suisse was in charge of restructuring Ukraine’s sovereign debt in 2000. Corlblow, representing the interests of a group of Russian investors, is trying to escalate the Eurobond repayment referring to a breach of the financial covenant in the company’s FY 2008 IFRS report. The group states that it would block any action on the Eurobonds besides a full and timely repayment no later than 30 September 2009. In July we had already warned that the situation around the company is worsening. Investors still had a chance to get rid of the bond at some 78.5% of par when we were writing this report. The other option would be to wait for restructuring terms, but this would incur certain risks especially given the currently unstable economic and political situation in Ukraine.