UKRAINE-RUSSIA/NAFTOGAZThe repayment date for Ukrainian state energy group Naftogaz's $500 million Eurobond came and went on Wednesday, but all bondholders got was a coupon payment.

Talks to restructure the five-year bond have resulted in Naftogaz presenting its solution to the problem -- swapping the old 8.125 percent bonds for new five-year ones which pay a slightly higher coupon of 9.5 percent and come with a government guarantee.

Given the way Naftogaz has approached its obligations to the Eurobond holders, it's hard to see what comfort "an irrevocable and unconditional sovereign guarantee from the Government of Ukraine" will give them.

The reality though is that bondholders have little choice. Vote against the proposed exchange and they could end up with nothing at all -- and a lengthy and expensive court battle on their hands.

Naftogaz knows this and its statement leaves little room for interpretation:

Naftogaz of Ukraine continues to believe that the best course for bondholders is to review the proposal and carefully consider the terms of the offer.