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Fitch reverts DTEK Renewables' rating to 'CC' after temporary 'RD' due to bond buyback

KYIV. March 6 (Interfax-Ukraine) – Fitch Ratings has downgraded DTEK Renewables B.V.’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to ‘Restricted Default’ (RD) from ‘C’, following the company’s disclosure of the result of its tender offer. Fitch has simultaneously upgraded the IDRs to ‘CC’, reflecting DTEK Renewables’ post-restructuring profile with continuing high default risk.

Fitch regards DTEK Renewables’ tender offer for part of its bonds as a part of a series of measures the company is adopting to reduce the probability of future defaults. However, Fitch deems default as still very likely, as the company is experiencing severe distress, including harsh operational disruptions and limited liquidity.

Following the tender, Ornex Limited (Cyprus), a 100% subsidiary of DTEK Renewables, will buy back eurobonds of the parent company maturing in 2024 with a total par value of EUR 35.471 million for up to EUR 15.833 million, including accrued interest, the buyback price is about 42% of the face value.

In Fitch’s view cash generated by DTEK Renewables may prove insufficient to cover debt service in 2023 related to bonds and bank debt, particularly in case of further operational disruptions and reduced settlements from the guaranteed buyer,” the report notes.

The group has sufficient cash, held partly in Ukraine and partly abroad, for the next bond coupon payments of about EUR 12 million, which are due in May and November 2023, Fitch reports.

“The company has so far not been granted an exception to the foreign-exchange (FX) transfer moratorium, without which it cannot transfer cash available in Ukraine abroad to pay its international bondholders,” the agency notes.

“DTEK Renewables is negotiating with its bank creditors to amend the repayment schedule to end-2023. In September 2022, DTEK Renewables used the remaining cash from its debt service reserve account. In November, a project finance subsidiary failed to pay EUR 9 million of the next scheduled payment on its bank debt, although it is not guaranteed by DTEK Renewables,” the report notes.