Relevant Document:Release
DTEK Energy is launching a consent solicitation to seek bondholder permission to pay the March 31 and June 30 coupon payments in 3.5% cash and 4% in kind, the Ukrainian utility said today.
The company is requesting a waiver of (i) the restriction on the number of consecutive payments of PIK interest permitted; and (ii) the timing of the delivery of any notice of the intention to pay PIK interest.
DTEK noted it will make the March 31 interest payment promptly upon the approval of the proposals.
The proposal comes after the company has faced a number of challenges including low electricity demand and production with low electricity domestic prices, significantly reduced payment collection, increased critical repairs and logistical interruptions. Management said these factors have resulted in DTEK Energy recording negative operating cash flow for March 2022 and, under such current conditions, which are highly uncertain, it is anticipated that negative operating cash flows will continue during the second quarter of 2022 (and possibly further).
The company has adopted a number of measures to mitigate and rationalize DTEK Energy's operations and cash flows, including:
- Continuous balancing of necessary efficient production on the basis of its fixed & variable costs vs. payment collection;
- Pursuing regulatory and national energy policy negotiations to maintain an adequate business environment;
- Minimizing any repairs and maintenance for the critical operating units; and
- Administration costs optimization
- Obtaining a waiver in respect of its payment obligations due in March 2022 under the restructured Alfa-bank Ukraine bank facility (the only remaining non-bond facility) and discussing potentially extending this approach until the end of the war.
Even with those efforts, there is no certainty that DTEK Energy will have sufficient funds to conduct necessary and efficient operations during the second and third quarter of 2022, it said.
DTEK said it is confident it will have the understanding and support of the international investment community, which is critical to enable it to stand firm and united in the fight for the integrity, liberty and safety of independent Ukraine.