Ukraine places USD 1 bln Eurobond, hopes to get IMF deal in March

The Ukrainian government finalized an additional placement of its 10-year Eurobonds, which were issued in November at an USD 1.25 bln outstanding debt at a coupon rate of 7.8%, Interfax reported on Feb. 4, citing anonymous sources. Other sources suggested yesterday the deal has been already done at a 7.625% yield, with USD 1 bln placed. The market YTM on the November issue, maturing in 2022, was 7.54% as of end-Feb. 4.

The prior day, First Deputy Prime Minister Serhiy Arbuzov said in a television interview that Ukraine needs “a month, maybe slightly more” to reach an IMF agreement on a new deal. Under negotiation are Ukraine’s monetary and exchange policy, as well as the issues of budget deficit and utility tariffs, he said.

Alexander Paraschiy: The new bond placement looks logical and broadly expected. As we reported in our Jan. 28 note, we believe the government should tap external markets to make external repayments and keep NBU reserves at a safe level. Ukraine has to repay USD 940 mln to the IMF this week and next week, in addition to USD 473 mln in interest and principal repayments, which should have been paid last week.

The deadline for an IMF agreement is clear now, as Ukraine will face IMF repayments worth USD 1.35 bln in late April. We believe there will be some clarity on the chance to get an agreement by late March.

Most likely, Arbuzov’s message was directed to potential buyers of the new bond. So far, we haven’t seen a real intention for Ukraine’s policy makers to pursue the IMF deal (which, as we highlighted, would require clear commitments from the government). The policy makers should do enormous homework before the IMF deal is signed to explain possible policy changes to Ukraine’s residents.