Ukraine registers UAH 117 bln issue of new Privatbank shares

The State Securities Commission registered an issue of new Privatbank shares for a total amount of UAH 116.8 bln, Interfax-Ukraine reported on Dec. 28. At the same time, no information was offered on whether any of the issued shares were paid. The government’s initial plan of Privatbank’s nationalization involved contributing UAH 43 bln into the bank’s equity by exchanging the government’s local bonds into new shares by the end of last week. That has not been done so far, to our knowledge.

The total issue of government bonds to bail out Privatbank (in local currency, for no more than 15 years, at a rate of no more than 10.5%) was planned at UAH 116.8 bln, according to last week’s government resolution.

In other news, Ukraine’s Finance Minister Oleskandr Danylyuk reported that the Cabinet is considering an issue of up to UAH 64 bln in government bonds (within a total limit of UAH 116.8 bln), whose par value is linked to dollars. This can be done to balance the bank’s foreign currency position. Such dollar-linked bonds may be issued for no longer than 15 years with an interest rate of no more than 6%.

Alexander Paraschiy: The registered issue of new bank’s shares for UAH 117 bln, as well as intention to issue USD-linked bonds for up to UAH 64 bln, contradicts Ukraine’s initial plan that government’s contribution into the bank’s equity might be as low as UAH 43 bln. Namely, the UAH 148 bln capital gap of Privtabank was planned to be covered by bailed-in liabilities (UAH 29.4 bln already bailed in) and contributions from the bank’s former owners (in the way of loan repayments or contribution of hard collateral under loans) in the amount of up to UAH 76 bln, with the remainder to be covered by the government (no less than UAH 43 bln).

Instead, the issue of shares for UAH 117 bln suggests that the government plans to buy out this issue, sooner or later. So it does not believe in any contribution from the former owners of the bank. This is in line with our expectations that the former owners won’t be cooperative with the government.

As such, the holders of PRBANK Eurobonds will be among the key contributors to filling the bank’s capital gap. And they are the only creditors who fully lost their investment in the bank.