Kyiv city introduces moratorium on payments on its Eurobonds

The Kyiv City Council voted to introduce an interim moratorium on any payments to the holders of the city’s Eurobonds (CITKIE), the council website reported on Oct. 8. The moratorium will be introduced on Nov. 6, the day of the maturity of Kyiv’s USD 250 mln Eurobond, and will be valid until the bonds’ conditions are amended. The right for the city to suspend the repayment of its Eurobonds was granted by Ukraine’s parliament on May 19.

Recall, Kyiv city’s two Eurobond issues, at a total amount of USD 550 mln, were included in the perimeter of Ukraine’s debt operation, which also encompasses all Eurobonds of the government (UKRAIN, UKRINF) and state enterprises (Ukreximbank, Oschadbank, Ukrzaliznytsia). At this stage, the Eurobonds of two state banks have been restructured, and the government is awaiting the result of the bondholder meetings to approve restrcuring of state Eurobonds next week. For the city of Kyiv and Ukrzaliznytsia, talks with creditors on restructuring terms are still ongoing.

Alexander Paraschiy: The city’s moratorium was an expected event as there were no illusions that it would repay its nearest Eurobond, as this contradicts the government’s position and agreements reached with the IMF. While the parameters of CITKIE restructuring are still unclear, we are sure that they won’t be worse than those approved for state banks and preliminarily agreed upon for the government. That said, we continue to believe that Kyiv city’s Eurobonds (priced 70-71 cents per dollar of par value) trade at an unjustified discount to the bonds of state banks (priced 86-88 cents) and the government (priced 79-83 cents).