Vodafone Ukraine agrees with holders of 49% of eurobonds to postpone repayment by 2 years

PJSC VF Ukraine (Vodafone Ukraine), the country's second-largest mobile operator, proposed to holders of its $399.88 million eurobonds to delay repayment by two years – until February 11, 2027. The proposal includes partial repayment of $99.88 million plus accrued interest, raising the coupon rate from 6.2% to 9.625%, and offering compensation of 2% of the bond's nominal value.

According to a company statement on the Irish Stock Exchange on Tuesday, a special committee representing 31% of bondholders and another individual bondholder, collectively holding 49% of the bonds, have already approved the proposal.

"The NBU Resolution No. 18 (dated February 24, 2022) prohibits the borrower from repaying principal debt under a loan agreement using funds located within Ukraine. Although the borrower has been financing interest payments under the loan agreement using foreign currency reserves held outside Ukraine, these reserves have now been depleted. Additionally, the borrower does not generate foreign currency revenues and thus lacks sufficient reserves outside Ukraine to repay the loan by the maturity date," the company explained, justifying the need for postponement.

Since the start of the war, Vodafone Ukraine has invested UAH 12.66 billion, including UAH 5.66 billion in 2023, which is 58% more than in 2022.

From January to September 2024, the company reported a 13% increase in revenue to UAH 18.1 billion and a 6% growth in operating profit to UAH 9.6 billion. However, net profit fell by 23%, primarily due to currency fluctuations, to UAH 2.9 billion. The customer base grew by 4.7% to 15.9 million, while ARPU (average revenue per user) rose by 8.9% to UAH 122.4 per month.

As of September 30, 2024, Vodafone Ukraine had UAH 12.7 billion ($308 million) in free cash, cash equivalents, and deposits (including government bonds) and net debt of UAH 10.1 billion ($244 million). By now, free cash reserves have decreased to approximately $270 million. The company has also secured a credit line with a Ukrainian bank, allowing it to access an additional $50 million in funding domestically, though it has yet to utilize it.

The company noted that, with the support of its shareholder, Vodafone Ukraine accumulated $53.5 million in an offshore account, which could be increased through a $53.5 million loan from its shareholder, Telco Investment BV.

"It is unlikely that the borrower will be able to accumulate additional funds outside Ukraine by the current bond repayment date (February 11, 2025) or before. Therefore, the borrower is unlikely to meet its repayment obligations unless the proposals are accepted," the statement concluded.

Vodafone Ukraine aims to accumulate sufficient funds outside Ukraine over the two-year extension to fully repay the eurobonds.

Applications to participate in the offer and receive the 2% compensation are accepted until 4:00 PM London time on January 27, with results to be announced on February 5. If approved, partial repayment will be made within three business days, and compensation will be paid within five business days.

J.P. Morgan Securities plc is assisting the company with the operation.

On the Frankfurt Stock Exchange, Vodafone Ukraine's eurobonds are currently trading at 89% of their nominal value.

Earlier, in October 2024, the company announced that it had held talks with holders of its $400 million eurobonds regarding restructuring. However, after approximately 31% of bondholders rejected the proposed terms, further negotiations were abandoned.

Negotiations on the restructuring of the five-year eurobonds, issued in 2020 at a 6.2% annual rate for $500 million (with $100 million later repurchased), were held from September 19 to 30. Bondholders were offered the following terms: an extension of the maturity date by three years, an increase in the interest rate to 7.7%, a 1.5% compensation, the use of onshore cash reserves in Ukraine for repayment, and the introduction of a new provision for mandatory early repayment if capital control measures were eased.

On February 14, 2024, the Ukrainian government appealed to the National Bank to allow major Ukrainian companies and holdings to sell foreign currency and transfer it abroad for eurobond payments and settlements with Western creditors. Companies on the list included VF Ukraine, Interpipe (a pipe and wheel holding), Metinvest (a mining and metallurgical holding), Kernel (an agricultural holding), and three DTEK holdings: DTEK Energy, DTEK Renewables, and DTEK Oil & Gas.

However, the National Bank did not satisfy these appeals. In May and July, currency restrictions were eased to facilitate servicing corporate eurobonds, although repayment remains a challenge.

In August, Vodafone Ukraine paid $12.4 million in interest on its eurobonds using funds from an onshore (Ukrainian) account, made possible by recent liberalization of currency controls permitting cross-border payments for debt servicing.

Since December 2019, Vodafone Ukraine has been part of NEQSOL Holding, a diversified group of companies operating in the energy, telecommunications, high-tech, and construction sectors.