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DTEK bank debt restructured in market-influencing USD 1.1bn deal

Annual Review 2017-2018

June 2018

A multijurisdictional CMS team advised key client Deutsche Bank and other creditors, including a group of US-based emerging markets hedge funds, on the restructuring of the bank debt of DTEK.

DTEK is the largest vertically-integrated and privately-owned energy group in Ukraine. The total amount of restructured bank debt was USD 1.1bn, making it one of the largest restructurings to have taken place in the region.

This complex transaction, which began in spring 2015, involved the composite restructuring of numerous previously unrelated facilities made available by a diverse lender group. Commercial, legal and political challenges brought added complications. These included a parallel restructuring of USD 1bn high yield bonds, by several UK Schemes of Arrangement, as well as the seizure of a significant part of the assets located in the Donetsk and Lugansk regions of Ukraine. Additionally, sanctions were imposed on Russian banks, several of whom were creditors, by the Ukrainian government.

The CMS team, with lawyers from our London, Amsterdam, Kyiv, Zurich and Moscow offices, advised on the English law restructuring and provided advice and insight to the lender group on the developing situation in Ukraine. We also advised on the implications for DTEK’s Dutch and Swiss group companies, which are borrowers of some of the debt.

CMS partner Mark Segall, who led the restructuring, said, “DTEK was a financially strong business but was hit by the inability to extract and transport its own coal from its Donetsk and Lugansk mines. This meant that it needed to spend significant amounts on imported coal, coupled with reduced tariffs on electricity usage imposed by the Ukrainian regulator – all against a backdrop of major political unrest in eastern Ukraine. This created a major cash flow situation for the company.

“It was a highly complex and dynamic situation with a diverse and changing group of creditors, differing financial structures and collateral and wide-ranging views around the negotiating table. This made it extremely challenging to reach a basis of agreement among all creditors. The successful restructuring of DTEK’s debt was ultimately a major achievement for the company and all those involved.”

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