RCS - DTEK Finance Plc - DTEK Energy's Cleansing Announcement

Houlihan LokeyAnnouncement

08/02/2021 18:20

RNS Number : 3754O
  
DTEK Finance Plc
  
08 February 2021
  
 

This announcement may contain inside information as defined in Article 7 of the Market Abuse Regulation (EU) 596/2014 (the "Market Abuse Regulation") and is disclosed in accordance with the Issuer's obligations under Article 17 of the Market Abuse Regulation. 
 
DTEK ENERGY GROUP AGREES RESTRUCTURING HEADS OF TERMS
 
DTEK Finance PLC (the "Issuer") is pleased to announce that the DTEK Energy B.V. group (the "Group") has agreed a heads of terms (the "Heads of Terms") for the restructuring of substantially all of the Group's indebtedness (the "Restructuring") with the ad hoc committee of holders of the Issuer's 10.75% Senior PIK Toggle Notes due 2024 formed in May 2020 (the " Noteholder Ad Hoc Group") and members of an ad hoc committee of the Group's bank lenders (the "Bank Lender Ad Hoc Group"). The Heads of Terms, together will certain other price sensitive information made available to the Noteholder Ad Hoc Group and the Bank Lender Ad Hoc Group during the course of negotiations, are scheduled to this announcement and are also available on the Group's website at https://energo.dtek.com/en/ir/bonds-reporting/.
 
The Group intends to implement the Restructuring on the basis of the Heads of Terms by way of a Restructuring Plan under Part 26A of the Companies Act 2006 and will circulate a practice statement letter and related documentation setting out the full terms of the Restructuring to its creditors in due course. Once implemented, it is expected that the Restructuring will provide the Group with a sustainable debt service profile and allow it to operate its business on a stable basis going forward.
 
 
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For any enquiries, please contact: 
 
DTEK Energy B.V.: Oksana Nersesova (Tel: +380 44 581 4522, NersesovaOE@dtek.com) 
 
Houlihan Lokey, financial adviser to the Group: Gijs de Reuver (Tel: +44 20 7747 2710, GdeReuver@HL.com) or Nicolas Guelfand (Tel: +33 1 53 43 38 08, NGuelfand@HL.com)
 
Latham & Watkins, legal adviser to the Group: Edward Kempson (Tel: +7 495 644 1928, Edward.kempson@lw.com) 
 
Rothschild & Cie, financial adviser to the Bank Lender Ad Hoc Group: Giovanni Salvetti (Tel: +7 495 775 8221, giovanni.salvetti@rothschildandco.com) or Simon Bard (Tel: +33 1 40 74 41 66, simon.bard@rothschildandco.com)
 
Hogan Lovells International LLP, legal adviser to the Bank Lender Ad Hoc Group: Alex Kay (Tel: +44 20 7296 2256, alex.kay@hoganlovells.com)
 
Dechert LLP, legal adviser to the Bondholder Ad Hoc Group: Solomon Noh (Tel: +44 20 7184 7337, solomon.noh@dechert.com) or Alastair Goldrein (Tel: +44 20 7184 7456, alastair.goldrein@dechert.com)
 
This press release may include "forward-looking" statements within the meaning of applicable securities laws. Any such statements reflect the current views of the Group about further events and performance. No assurances can be given that such events or performance will occur as projected and actual results may differ materially from these projections.
 
The distribution of this announcement into certain jurisdictions may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement is for information purposes only and is not an offer of securities in any jurisdiction.
 
DTEK Energy Restructuring - Non-binding Heads of Terms
This is a summary of terms delivered without prejudice and subject to contract. It is neither an offer to commit to a sale, make an equity investment or provide debt funding nor a commitment of any other kind. Any obligation of the parties to enter into any kind of transaction with each other will be subject to various conditions customary for transactions of this sort, including mutual due diligence, governing body and regulatory approvals, as well as the execution and delivery of definitive legal documentation satisfactory in all respects to the parties.  The final structure and terms of the contemplated restructuring transaction may be subject to revision and based on, inter alia, legal, tax and corporate due diligence. The provisions of this non-binding heads of terms are not intended to be exhaustive and are not intended to be binding or create binding obligations or other legal relations on the parties and their respective associates/affiliates. The distribution of these heads of terms into certain jurisdictions may be restricted by law. Persons into whose possession these heads of terms comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. These heads of terms are for information purposes only and are not an offer of securities in any jurisdiction.




 


 






DTEK Oil & Gas Notes (the "DOG Notes")


·    Issuer: NGD Holdings B.V. 
 
·    Principal Amount:  $425,000,000 (the "DOG Notes Amount"). 
 
·    Interest: 6.75% per annum, payable semi-annually in cash.
 
·    Final maturity: 31 December 2026.
 
·    Amortization: $50m per annum contractual amortization commencing on and from 31 December 2023. Optional redemption by additional $50m per annum at par.
 
·    Additional credit support:
·    Effective Date: guarantees/suretyships from DTEK Oil & Gas B.V. ("DOG"), Naftogazvydobuvannya PJSC (the approval of the minority shareholder is a CP to the implementation of the restructuring) and LLC NGD Holdings (DOG, together with all its direct and indirect subsidiaries, the "DOG Group"). 
 
·    DOG shall procure that the entities that are guarantors under the DOG Notes shall account for at least 75% of the total consolidated EBITDA of DTEK Oil & Gas Holdings B.V. ("Holdings B.V."), provided that any subsidiary of Holdings B.V., (except for any entity in the DOG Group), in which Holdings B.V. (or its affiliates) does not own (directly or indirectly) at least 75% of the share capital (together the "Excluded Subsidiaries") shall be excluded from any calculation of the consolidated EBITDA of Holdings B.V. and shall not be required to become a guarantor under the DOG Notes. If Holdings B.V. or any of its subsidiaries that is not an Excluded Subsidiary (a "Subsidiary") (in each case, on a standalone basis excluding intragroup operations and financial results of its subsidiaries) accounts for more than 10% of the total consolidated EBITDA of Holdings B.V., Holdings B.V. shall, or shall procure that such Subsidiary shall (as applicable), become a guarantor under the DOG Notes. 
 
·    EBITDA shall, for this purpose, be determined by reference to the latest annual financial statements for the relevant financial year of Holdings B.V., but shall exclude any EBITDA of any Excluded Subsidiaries. Holdings B.V. shall be obliged to publish the financial statements by no later than 30 May of the immediately following year. To the extent that, as of 31 December of the immediately preceding year, any entity is obliged to become a guarantor under the DOG Notes, the Issuer shall procure that such guarantee is granted by no later than 30 May of that year. The first testing shall be undertaken on the basis of the financial statements for the year ended 31 December 2020. The Issuer shall deliver to the trustee a compliance certificate by 30 May of each year showing EBITDA attributed to each entity for the purposes of this determination.
 
·    DOG shall pledge all of its rights in relation to all intra-group receivables/loans that resulted from the outstanding consideration from the sale of assets to DTEK Oil&Gas Development B.V. ("Development B.V.")  during 2020 in the total aggregate amount of approximately USD 76m, and it shall be prohibited from amending the terms of those loans/receivables without the consent of the DOG noteholders. The governing law of the loans/receivables shall be English law. Each affiliate of the Issuer that is not part of the restricted group and which is owed any amounts by the DOG Group shall execute a deed of subordination and agree that any such debt shall be subordinated to the DOG Notes, provided that, the DOG Receivables will be released and discharged on or promptly following the Effective Date and will not be so subordinated. 
 
Covenants: package TBD; to track recent market precedents for issuances by similar EM entities. The exact high-yield covenant package (including restricted payments, debt incurrence, restrictions on liens, and asset disposals) is to be discussed. From the time when Holdings B.V. or any of its subsidiaries is required to accede as a guarantor, it shall be subject to the covenants under the DOG Notes. 
 
Holdings B.V. shall procure that, from the Effective Date:
·    no share capital of any Subsidiary shall be sold or otherwise transferred to any person, except to the extent that such Subsidiary does not cease to be a Subsidiary immediately following such sale or transfer; 
·    no Subsidiary shall be merged, de-merged, consolidated, spun-off, or amalgamated into any other person, except to the extent that the entity formed by or resulting from such merger, de-merger, consolidation, spin-off, or amalgamation is a Subsidiary immediately following such merger, de-merger, consolidation, spin-off or amalgamation. 
·    no licence held by a Subsidiary as at the Effective Date (the "Licences") shall be sold, assigned or otherwise transferred, except to Holdings B.V. or another Subsidiary, and any subsidiary of Holdings B.V. that holds a licence on the same (or substantially similar) terms in respect of the same field(s) as under any Licence shall be deemed to be a Subsidiary; 
·    none of the current or future business activities of a Subsidiary which are permitted under a Licence shall be transferred, except to Holdings B.V. or another Subsidiary; 
·    neither it, nor any Subsidiary, shall enter into or have the benefit of any Affiliate Transactions which are not on arm's length terms; and
·    neither it, nor any Subsidiary shall, in one or a series of related transactions, sell or otherwise transfer all or substantially all[1] of its assets, except to Holdings B.V. or another Subsidiary.
Holdings B.V. shall procure that, to the extent any Subsidiary accedes as a new guarantor (a "New Guarantor") on a date falling after the Effective Date, on the earlier of the date of such accession and the deadline for such accession as described above (the "Accession Date"): 
·    the Consolidated Leverage Ratio of DOG together with its subsidiaries (the "Original Restricted Group") plus any entity that has acceded as a guarantor since the Effective Date plus the New Guarantor (together, the "New Restricted Group") shall not exceed 3:1. Consolidated Leverage Ratio to be calculated as the ratio of (i) Total Debt of the New Restricted Group on the Accession Date to (ii) Consolidated EBITDA of the New Restricted Group for the most recent financial year for which audited financial statements are available; and
·    the New Guarantor shall not be engaged in or have the benefit of any current Affiliate Transactions which are not on arm's length terms, and any Indebtedness of the New Guarantor owing to any Affiliate (other than a member of the New Restricted Group) shall be subordinated in right of payment to the New Guarantor's Notes guarantee pursuant to a written agreement. 
·    Information covenants: For DOG: semi-annual financials, public audited annual financials, semi-annual management disclosure calls, semi-annual and annual operational updates. For Development B.V. and Holdings B.V.: public audited annual financials.
 
·    Listing: listed[2] on the Global Exchange Market (the "GEM") of the Irish Stock Exchange ("ISE"), with standards of disclosure required for ISE GEM listed debt. Listing particulars for the DOG Notes to be made publicly available by DOG. 
·    Rating: the company shall obtain a credit rating from one of S&P, Fitch or Moody's for the DOG notes within six months from the Effective Date.




New DTEK Energy Notes (the "New Notes")


·    Issuer: DTEK Finance Plc or other 100 per cent owned subsidiary of DTEK Energy (the "New Notes Issuer").
 
·    Amount: equal to the total principal amount outstanding under the Existing Notes and Existing Loans (including all accrued and unpaid interest (provided that, during the period commencing on 1 February 2021 and finishing on the earlier of the restructuring effective date (the "Effective Date") and 30 April 2021, interest under the Existing Notes and the Existing Loans shall be deemed to accrue at 5% per annum (of which 3.5% shall be payable as PIK and 1.5% shall be payable in cash (the "1.5% Cash Interest")), provided further that, if the Effective Date occurs after 30 April 2021, the interest rate under the Existing Notes and Existing Loans shall be deemed to revert back to the applicable contractual rate from 1 May 2021 until the Effective Date) but excluding any default interest and penalties (if any) which shall be waived) on the Effective Date, less the sum of (i) the DOG Notes Amount; and (ii) amount of commitments held by Exempt Lenders who elect to receive loans through the restructuring.
·    Interest: 
·    Except as explicitly provided below, 7% per annum, payable quarterly.
·    In 2021, 5% per annum in cash or, at the election of the New Notes Issuer, partially in PIK, provided that at least 1.5% (out of 5%) shall be paid in cash. The 1.5% Cash Interest shall also be payable in cash on the first interest payment date under the New Notes.
·    From 31 January 2022 until final maturity, the New Notes Issuer shall have the option to elect to partially PIK the interest for the next interest period provided that:
§ such option may only be exercised by the New Notes Issuer with respect to four non-consecutive interest periods during the existence of the New Notes;
§ at least 3.5% shall be payable in cash in such interest period; 
§ the DTEK Energy B.V. Supervisory Board (the "Supervisory Board"), including the Independent Supervisory Board Member, must approve the use of this option; 
§ for any interest period where the New Notes Issuer has elected to partially pay PIK interest (except for any interest period during 2021), the interest rate on the New Notes shall increase by 0.5% to 7.5% per annum for that interest period; and
§ any interest that has been PIK'ed under this provision (except for any interest PIK'ed period during 2021) shall be repaid at par (together with any accrued but unpaid interest thereon) at the first possible opportunity from available Excess Cash, and in priority to any debt repurchases.
 
·    Final maturity: 31 December 2027.
 
·    Amortization: $20m per annum contractual amortization in two equal semi-annual installments per year commencing on and from June 2022.
 
·    Debt repurchases: all Excess Cash as of the end of each semi-annual period to be used for discounted buy-backs by way of public Dutch Auctions. Any unused amounts following completion of the Dutch Auction should be used to redeem the New Notes pro rata at par. 
 
"Excess Cash" means the excess of average available cash in any semi-annual period over and above $50m after (i) payment of all cash interest and contractual amortisation in respect of the New Notes and Exempt Loan(s), (ii) repayment at par of New Notes constituting previously PIK'ed interest (plus any accrued and unpaid interest thereon) and (iii) payments of all interest and contractual amortization on Essential Lines during that semi-annual period; to be calculated and verified by a Big 4 accounting firm or another company approved by the Independent Supervisory Board Member within a pre-agreed fee budget.
 
·    Annual Permitted Capex Expenditures: Annual capex that relates to DTEK Energy's existing business (as described in DTEK Energy's business plan of July 2020 (the "Business Plan") to be limited to amounts in the Business Plan; provided that any amounts unused in any year shall be carried forward to the next year only.
 
·    Additional Credit Support: Share pledge over 100% of the shares in DTEK Energy B.V. to be granted by a new intermediary company to be inserted between DTEK B.V. and DTEK Energy B.V.
 
·    Governance: creditors to propose at least three candidates (with appropriate credentials) from which one candidate will be appointed to the Supervisory Board (the "Independent Supervisory Board Member") with veto rights over: (i) all asset disposals and purchases, (ii) all affiliate transactions and (iii) contractual and commercial arrangements between D.Trading and DTEK Energy B.V (in each case, subject to thresholds to be agreed), and (iv) capex relating to additional business lines not included in the Business Plan.  Only technical / non-commercial amendments of the arrangements between DTEK Energy B.V. and D.Trading can be approved without the Independent Supervisory Board Member. As a condition precedent to the occurrence of the Effective Date, the terms of the ongoing arrangements between DTEK Energy B.V. and D.Trading must be pre-agreed with the relevant individual proposed by the creditors and chosen to be appointed as the Independent Supervisory Board Member or amended if necessary - the satisfaction of such CP to be evidenced by the confirmation of such nominee.
 
·    Covenants and Undertakings: enhanced package of covenants and undertakings compared to the covenant package for the Existing Notes; including but not limited to, no dividends until repayment or refinancing of the New Notes as well as materially reduced thresholds on affiliated party transactions. Undertaking from DTEK B.V. that all future new business activities related to DTEK Energy B.V. and / or utilizing the existing asset base of DTEK Energy B.V. (including grid connection) such as energy storage, ancillary services, balancing services, gas peaker plants, and carbon capture projects will be undertaken on the balance sheet of DTEK Energy B.V. and will become part of the guarantor group, except to the extent restricted by applicable law or regulation.
 
·    Exempt Lenders: separate pari passu loan tranche with comparable economics as the New Notes to be structured for lenders who cannot hold bond instruments. 
 




Restructuring fee


·    Amount in cash equal to 2% of the total aggregate principal amount of the New Notes together with the amount of commitments held by Exempt Lenders who elect to receive loans through the restructuring on the Effective Date, to be paid on the Effective Date to those who voted in favor of the restructuring.
 




Supplementary provisions


·    To be discussed.




 
Cleansing Statement
 
The total aggregate amount of related party receivables owing to the DTEK Oil&Gas B.V. group was reduced during 2020 to approximately UAH 11 billion as at 31 December 2020 as a result of certain non-cash settlements (including by way of set-off against related party payables and dividends declared). Under the revised budget for 2021, DTEK Energy B.V. expects CFADS of $69m.
 
 




[1] The term "all or substantially all" shall be interpreted in accordance with NY law.


[2] Proposed format of prospectus is based on exchange format rather than new issuance - TBC. 


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