City of Kyiv repays last tranche of its UAH 2.6 bln bonds maturing in 2014

The city of Kyiv (CITKIE) redeemed UAH 750 mln (around USD 50 mln) of its local bonds on Nov. 17, the Interfax-Ukrayina news agency reported, citing a Kyiv administration official. With this last redemption, the city has repaid all four tranches of its local bonds totaling UAH 2,625 mln that have matured since early October. The city issued a new series of its local bonds for up to UAH 2,625 mln in June 2014, maturing in October 2015, to finance the repayment. However, it did not offer an update on how many bonds of the new issue have been placed. In particular, the repayment of UAH 750 mln was made from a social-economic development fund of Kyiv, according to Interfax.

Roman Topolyuk: The successful payment indicates the city remains solvent despite the economic hardship. It will have an even tougher repayment schedule next year, consisting of three tranches of local bonds, maturing in October-December, of a total amount of up to UAH 5,415 mln (including up to UAH 2,625 mln in bonds issued recently), as well as Eurobonds worth USD 250 mln maturing in November. In previous years, the city’s budget was always able to secure smooth repayment of all its debts, and we see no reason to doubt that will be the case in 2015 as well.

Clearly, much will depend on the 2015 city budget (which depends on Ukraine’s state budget) and the ability of state banks to refinance the city. Kyiv Mayor Vitali Klitschko stated on Nov. 18 that the city’s budget deficit is about UAH 2 bln a year. In previous public comments, Klitschko argued that the newly elected parliament should vote to repeal a law that allows the central government to withhold for the state budget 50% of the personal income tax that is collected in Kyiv. The state budget started to benefit from these collections in 2011.