Cabinet approves withdrawal of USD 3 bln Chinese loan

Ukraine’s Cabinet of Ministries agreed to provide a state guarantee for a USD 3.0 bln loan from the Chinese Export-Import Bank which is planned to be directed at improving efficiency in the domestic agricultural sector. The State Food and Grain Corporation will be the recipient of the loan, which will cost 6M Libor+4.5% with a 5-year grace period and maturity in 15 years. According to the Agricultural Ministry, Ukraine will sign the loan agreement in mid-October, and, as a part of the deal, will secure supplies of about 3.0 mmt of corn to China each year, at a market price.

Alexander Paraschiy: The Chinese loan, as well as the recently issued Eurobond, will help ease pressure on the Ukrainian currency, at least until the end of 2012. Stable demand for corn from China (amounting to 13%-17% of annual corn production in Ukraine) is another benefit for Ukraine, as well as for its farming companies, like corn-focused Industrial Milk Company (IMC PW).