A hedge fund that publicly donated $1mn to provide humanitarian assistance to Ukraine is also resisting efforts from the country’s state-owned gas company to secure more breathing room on its debt.
London-based VR Capital is one of the lead investors involved in a stand-off between Naftogaz and its bondholders, said people familiar with the ownership of the bonds, as the energy company tries to delay repayment by two years.
Naftogaz, the biggest state-owned company in Ukraine, was instructed to restructure by the Ukrainian government, the Financial Times reported in July, as the country seeks to renegotiate its sovereign debt to preserve cash for its fightback against Russia’s invasion.
The Ukrainian government said in August it was “counting on a favourable decision” from Naftogaz bondholders to “make it possible to consolidate all existing resources for the state’s primary needs”.
However, holders of its bonds maturing in 2022 and 2026 have rejected the company’s proposals, leaving the company in default. In contrast, investors in the 2024 bonds have accepted the plan, allowing €600mn of principal payments and €90mn of interest to be deferred.
VR, headed by Richard Deitz, a former co-founder of investment bank Renaissance Capital, is a big holder of the bonds and has taken a lead role in blocking the plans, said people familiar with the restructuring.
VR’s move comes just months after it said that it, along with employees and Ukrainian affiliates, had provided more than $1mn in humanitarian and logistical assistance to Ukraine and was prepared to provide further support.
Deitz said at the time that: “We are devastated by the ongoing hostilities in Ukraine and horrified by the images of atrocities committed against civilians emerging in recent days. We stand together with the Ukrainian people.”
He added: “As one of the largest western investors in Ukraine, we pray for an immediate end to the conflict and are ready to participate in the country’s reconstruction after the war.”
The Ukrainian government said last month that delaying bond payments would “enable Naftogaz to use the accumulated funds for natural gas import and preparation for the heating season, which could be the most difficult in modern Ukrainian history”.
Bondholders, which include both hedge funds and more traditional asset managers, argue that Naftogaz is easily able to pay its bonds back and that the decision to push back payments is politically driven. “There is a lot of frustration that the company hasn’t engaged,” said one person familiar with their thinking.
Earlier this month Naftogaz said it had begun arbitration proceedings against Russia’s Gazprom, claiming it had not paid for gas transportation through Ukraine.
VR declined to comment.
