Ukraine’s Naftogaz restructuring blocked by hedge fund VR Capital

A hedge fund that publicly donated $1mn to offer humanitarian help to Ukraine can be resisting efforts from the nation’s state-owned fuel firm to safe extra respiratory room on its debt.

London-based VR Capital is among the lead traders concerned in a stand-off between Naftogaz and its bondholders, mentioned individuals acquainted with the possession of the bonds, because the vitality firm tries to delay reimbursement by two years.

Naftogaz, the largest state-owned firm in Ukraine, was instructed to restructure by the Ukrainian authorities, the Monetary Instances reported in July, because the nation seeks to renegotiate its sovereign debt to protect money for its fightback towards Russia’s invasion.

The Ukrainian authorities mentioned in August it was “relying on a beneficial resolution” from Naftogaz bondholders to “make it attainable to consolidate all current assets for the state’s major wants”.

Nonetheless, holders of its bonds maturing in 2022 and 2026 have rejected the corporate’s proposals, leaving the corporate in default. In distinction, traders within the 2024 bonds have accepted the plan, permitting €600mn of principal funds and €90mn of curiosity to be deferred.

VR, headed by Richard Deitz, a former co-founder of funding financial institution Renaissance Capital, is a giant holder of the bonds and has taken a lead function in blocking the plans, mentioned individuals acquainted with the restructuring.

VR’s transfer comes simply months after it mentioned that it, together with workers and Ukrainian associates, had supplied greater than $1mn in humanitarian and logistical help to Ukraine and was ready to offer additional assist.

Deitz mentioned on the time that: “We’re devastated by the continued hostilities in Ukraine and horrified by the photographs of atrocities dedicated towards civilians rising in latest days. We stand along with the Ukrainian individuals.”

He added: “As one of many largest western traders in Ukraine, we pray for a direct finish to the battle and are able to take part within the nation’s reconstruction after the struggle.”

The Ukrainian authorities mentioned final month that delaying bond funds would “allow Naftogaz to make use of the gathered funds for pure fuel import and preparation for the heating season, which could possibly be essentially the most tough in trendy Ukrainian historical past”.

Bondholders, which embody each hedge funds and extra conventional asset managers, argue that Naftogaz is definitely capable of pay its bonds again and that the choice to push again funds is politically pushed. “There may be a variety of frustration that the corporate hasn’t engaged,” mentioned one individual acquainted with their considering.

Earlier this month Naftogaz mentioned it had begun arbitration proceedings towards Russia’s Gazprom, claiming it had not paid for fuel transportation by way of Ukraine.

VR declined to remark.