Ukraine places 13Y Eurobonds, buys 2021, 2022 Eurobonds at premium

The Ukrainian government placed at par USD 2 bln in
Eurobonds maturing in March 2033 at a 7.253% yield to maturity (YTM, priced on
July 23) with the settlement expected on July 30, according to an announcement
on MinFin’s website.

The government will use the total of USD 846 mln to
buy back notes maturing in September 2021 (the principal of USD 435 mln at
104.5% of par) and 2022 (the principal of USD 371 mln at 105.5%), according to
MinFin’s announcement at a stock exchange website. The settlement is expected
on July 28.

The tendered bonds traded at 103.3% and 105.1% of par
on July 21, the day before the tender offer announcement, according to
Bloomberg. Currently, there are USD 1.409 bln of 2021 notes and USD 1.384 bln
of 2022 notes outstanding.

Evgeniya Akhtyrko: The yield
for the new notes Ukraine has placed – and the premiums for the outstanding
notes it offered to buy – is comparable to those at its first, subsequently cancelled attempt at
this liability management exercise in late June – early July, according to our
assessment. Namely, the premium at which the government plans to buy back the
2021 notes, 1.2pp, is higher than the 0.9pp it offered on June 30, while the
premium for the 2022 notes, 0.4pp, is lower than 0.6pp previously, based on our
calculations. The YTM of the newly placed bonds is 0.05pp lower than the 7.3%
that Ukraine obtained at the previous pricing in early July, while the yield
spread with Ukraine’s existing September 2032 Eurobond amounted to about 0.1pp
at the July 23 pricing, lower than 0.2-0.3pp previously, based on our
calculations.

As a result, it’s encouraging to see Ukraine’s
government remedy the shameful situation with the cancellation of the Eurobond
placement on July 2. Firstly, the market’s reaction to the appointment of
Kyrylo Shevchenko as NBU governor was neutral, which is a victory in itself
considering several other candidates could have caused an extremely negative
reaction. Secondly, the newly appointed NBU governor and President Zelenskiy
restated that Ukraine will continue its cooperation with the IMF, while the
independent status of the NBU will be preserved. Thirdly, the market apparently
positively reacted to the NBU’s decision to keep the key policy rate unchanged
at 6.0%, which became known several hours before the subscription book was
closed.