Ukraine to only partially rollover its USD 2 bln VTB loan

Ukraine’s Finance Ministry reached an agreement with Russia’s VTB on the partial repayment/restructuring of a USD 2.0 bln loan maturing in June, according to UNIAN. USD 0.5 bln will be repaid upon maturity, USD 0.5 bln will be refinanced with another VTB loan and USD 1.0 bln will be refinanced via the issuance of Eurobonds likely to be purchased by VTB. The new loan and Eurobonds will be issued at market rates.

Vitaliy Vavryshchuk: The outcome of the negotiations, if the leaked information turns out to be true, is slightly disappointing as the market broadly expected the loan to be rolled over with new debt from VTB in full. We stick to our view that Ukraine has to raise at least USD 2.0-2.5 bln via external markets this year (in addition to rolling over the VTB loan) to ensure smooth servicing of its debt and coverage of the state budget gap. Repayment of the USD 0.5 bln portion of the VTB loan in June implies the Ukrainian government should take more active steps to secure the issuance of the new Eurobond within the next 3-4 months.