The company also plans to apply to the High Court of Justice of England and Wales to be sanctioned to implement a “Scheme”, an action which obligates the bondholders to participate in the note exchange. DTEK intends to preserve the right to apply the Scheme even if the minimum acceptance threshold is met. DTEK has stated that if its appeal is not satisfied by the Court, and if the minimum acceptance threshold is not met and the exchange offer is not consummated, the company will default on the existing notes, thus triggering cross defaults under certain other debt obligations.

DTEK announces its offer to restructure 2015 Eurobonds Yesterday, DTEK announced its offer to exchange its US$200m in outstanding Eurobonds with a 9.50% coupon due 28 April 2015 for US$200 cash per Eurobond and up to US$170m of new notes with a 10.375% coupon with maturity in April 2019. The offer expires on 22 April and requires accepting a minimum of 85% of bondholders’ amount except for the US$19m in bonds held by DTEK. Ultimately, this amounts to US$131m. The bondholders will be eligible for an early redemption fee of US$20 per Eurobond if they accept the offer before 8 April. The company also plans to apply to the High Court of Justice of England and Wales to be sanctioned to implement a “Scheme”, an action which obligates the bondholders to participate in the note exchange. DTEK intends to preserve the right to apply the Scheme even if the minimum acceptance threshold is met. DTEK has stated that if its appeal is not satisfied by the Court, and if the minimum acceptance threshold is not met and the exchange offer is not consummated, the company will default on the existing notes, thus triggering cross defaults under certain other debt obligations. An initial court hearing at which DTEK will seek leave to convene a meeting of the bondholders to consider the Scheme is expected to be held on 14 April 2015. The meeting of the bondholders is expected to occur on 23 April 2015. It is also planned that the court would sanction the Scheme in a court hearing on 27 April 2015. Investment implications: The terms of DTEK’s offer appear less attractive than similar exchange offers of the company’s peers, Metinvest and Ferrexpo, which agreed to a 25% cash consideration for exchanging their Eurobonds. As the offer announcement comes somewhat delayed, there is little time left for negotiations between the company and the numerous bondholders, as well as for meeting the minimum acceptance threshold. As a consequence, DTEK is trying to secure the note exchange as binding with the help of the court, a move which makes renegotiating any terms of the offer even less likely. Given the limited time and choices that the bondholders have, we estimate the chance of meeting the minimum acceptance threshold and the offer coming through as high. Table 1. DTEK Eurobond quotation as of market close, 24 March 2015 Issuer Moody's/S&P /Fitch Ccy Volume Coupon rate (%) Maturity Price (%) YTW (%) Spread (bp) DTEK Caa3/--/CCC USD 180m 9.50 28-Apr-15 66.791 541.27 54,102 DTEK Caa3/--/CCC USD 750m 7.875 04-Apr-18 36.75 51.169 5,027 Source: Bloomberg Alexander Martynenko, Kiev, +38044 2200120 ext.726