UPDATE 2-Ukraine's Naftogaz fails to pay $1.6 bln govt-guaranteed bond; no default yet

Среда, 1 октября 2014 15:22 MSK

(Adds Ukraine govt comment, CDS, details)

By Sujata Rao and Natalia Zinets

LONDON/KIEV Oct 1 (Reuters) - Ukraine's state energy company, Naftogaz, has failed to pay a maturing $1.6 billion debt, raising risks of a default on the country's sovereign Eurobonds and sending debt insurance costs to seven-month highs.

The government assured investors on Wednesday they would soon be paid on the bonds, which were due on Sept 30 and have now entered an initial 10-day grace period.

The Eurobond, which amounts to $1.67 billion once interest is included, is fully guaranteed by the Ukrainian government. So if it is not paid within the grace period, it will trigger so-called cross-default clauses, bringing due all of Ukraine's sovereign bonds at once.

"I have not seen the money. I had not expected this," said one European portfolio manager, who requested anonymity. "They are not in default yet, so hopefully we will be paid within the grace period."

The investor said he also held other Ukrainian bonds, which he was now "very uncomfortable" with, though he said high yields somewhat compensated for risks. Ukraine's bonds are trading with yields of more than 10 percent

Ukraine's other dollar bonds have been trading between 82-88 cents in the dollar, on expectation Kiev will be forced into some form of debt restructuring in coming months

Bond prices were mostly unchanged on the day, but Ukraine's sovereign credit default swaps, used by investors to insure exposure to a credit instrument, rose 30 basis points to 1322 bps, the highest since end-February, according to Markit.   Продолжение...