Kyiv City Council Plans for USD 500 mln Eurobond Issue

The Kyiv City Council (S: BB-; M: B1) adopted a decision to issue Eurobonds with a volume up to USD 500 mln (or EUR 385 mln) in 2007. It also set yield limits for possible maturities that the issue can have: 8.1% for five years; 8.3% for seven years and 8.5% for 10-year tenor. Oleksandr Klymchuk: As we expected, the volume of the issue was raised from the initially announced USD 250 mln and now the amount is more attractive. Moreover, if the bonds are placed close to the aforementioned yield limits, Kyiv will provide investors with an ample 215-220 bps premium over Ukrainian Sovereigns. Such a premium is not justified and hardly possible, in our view, as Kyiv has the highest GDP per capita in Ukraine and is one of the fastest growing regions in terms of GDP growth (12.9%) and real wage increases (24.2%). Currently, the city has three outstanding Eurobond issues totaling USD 600 mln (3.3% of Kyiv’s GDP) and is the only municipal entity in Ukraine that has issued Eurobonds so far (Odesa City Council has plans to tap the Eurobond market with a small issue)