* Naftogaz seen repaying bond despite restructure talk
* Conflicting statements on who would negotiate any changes
* Analysts say Naftogaz can afford to pay, PM suggests same
By Sabina Zawadzki
KIEV, Aug 12 (Reuters) - Ukraine's state energy firm Naftogaz, a creaking behemoth at the centre of geopolitical energy rows with Russia, is expected to repay a Eurobond due in September despite government talk to the contrary.
Naftogaz reflects for many investors the financial
attractiveness -- or otherwise -- of the ex-Soviet state, and
analysts say government calls for its $500 million Eurobond
It is the only publicly traded bond of Ukraine's largest company which President Viktor Yushchenko has said repeatedly was on the verge of bankruptcy as it buys expensive gas from Russia and sells it domestically at subsidised prices. So pulses were raised when the finance ministry last month suggested the bond's terms should be renegotiated -- especially given that in the same week the International Monetary Fund agreed to pay a $3.3 billion tranche, earmarked specifically for external debt payment, of the rescue package it agreed with Ukraine late last year.
With less than two months to the Sept. 30 redemption date, however, many analysts think a restructuring will not happen. Certainly at Naftogaz there appears to be little sense of rush and it is unclear whether any talks have begun.
"This is a finance ministry initiative. We don't know yet what they have thought up," Valentyn Zemlyanski, Naftogaz spokesman, told Reuters.
The finance ministry thinks otherwise:
"Only Naftogaz can conduct talks and speak of any (restructuring) conditions," Deputy Finance Minister Andrei Kravets told the Ekonomicheskiye Izvestiya business daily.
Bondholders either declined or were unavailable to comment.
For Ukraine watchers such contradictory comments make restructuring unlikely. They say the gains of changing the terms of a bond worth less than the average monthly bill Naftogaz paid for Russian gas last year would be dwarfed by the losses.
Ukraine signed its $16.4 billion deal with the IMF last year when global demand for its steel exports collapsed, crushing its economy and slashing the value of its currency. Yet a power struggle between Prime Minister Yulia Tymoshenko and former ally Yushchenko has twice put the package in jeopardy.
AMBIGUITY, DANGER OR MANIPULATION?
The release of the third IMF tranche was a relief for investors wearied by Ukraine's constant political turmoil.
Tymoshenko denies Naftogaz is in financial straits while Yushchenko has slammed the gas price deal she made with Russia after a three-week standoff and supply cuts in January.
However, "with the IMF money, they clearly have the cash to pay ... and the timing is quite difficult. It's quite late in the day and I don't sense they want to do an aggressive restructuring," said Tim Ash, head of CEEMA research at RBS.
"The danger is that all the good work at the sovereign level to maintain creditworthiness would be blown away by acting in an aggressive way," he said, referring the government's timely repayment of a $500 million Eurobond last week.
Goodwill towards Naftogaz has been notable in recent months. Not only did the IMF disburse the third tranche, but Kiev scored a $1.7 billion EU-brokered deal for the modernisation of the Soviet-built energy infrastructure. [ID:nLV21367]
So some question how much the talk of restructuring means.
"Restructuring is a word officials normally avoid because it is so ambiguous," said Jerome Booth, head of emerging markets at investment fund Ashmore. "That in itself raises the issue of whether it was a fully thought out idea."
He declined to say if Ashmore was a Naftogaz bondholder.
Tymoshenko herself indicated the government was willing to honour the debt, a day after acting Finance Minister Ihor Umansky said again that restructuring was "necessary".
"Today we have paid $500 million in external debts and we will pay back $1.5 billion to the end of the year," she promised television viewers last week. [ID:nL5300057]
Although she gave no details of the debts, Ukraine has that amount outstanding this year if quasi-state debts are included: a 768 million Swiss franc ($721.1 million) Eurobond, a $250 million Eurobond of state bank Ukreximbank and the Naftogaz bond.
The Swiss franc Eurobond was due in 2017 but investors exercised an option to be paid back early. Analysts said that showed a level of distrust in the market that did not bode well for any restructuring talks.
The talk of restructuring has sent Naftogaz bond yields spiking to 260 percent although they have since come down to 206 percent. Moody's cut Naftogaz to Caa2 from Caa1, though Fitch said it would not see a forced restructuring as a sovereign default. [IDnWLA0825] [ID:nWNA0962].
The sovereign Swiss franc Eurobond yield also spiked, at 12.5 percent, though has also come down to 10 percent. The cost of insuring against a Ukrainian debt default through credit default swaps has fallen to 21 percent upfront -- meaning investors must pay 21 percent of the sum insured in advance -- from 35 percent early July. "If there is restructuring then this will hit all Ukrainian bonds -- sovereign and corporate," said Agshyn Myrzazade, an analyst at Foyils Securities in Kiev.
"Our opinion is that this is most likely the kind of manipulation which happens when someone wants to profit from it -- lower the bond price, buy it and then hold it until it is paid out," he said. (Additional reporting by Yuri Kulikov in Kiev and Sebastian Tong in London; Editing by Ruth Pitchford)