Ukraine bids 106 on all its 2019 Eurobonds, some 2020 notes at 106.75

Ukraine’s Finance Ministry announced on Sept. 7 a tender
offer to purchase all Eurobonds (UKRAIN) maturing in September 2019 at 106.0%
of par. It also intends to purchase some Eurobonds maturing in September 2020
at 106.75% of par, for an amount equal to USD 1.5 bln less the amount of the
2019 notes to be purchased.

The total amount outstanding for the 2019 notes is USD
1.822 bln, while for the 2020 notes is USD 1.780 bln. The deadline for
bondholders to offer their Eurobonds is September 15. The scheduled settlement
date is September 27. To finance the purchase, MinFin is going to issue new
Eurobonds before the settlement date, and it is starting a road show to market
the new issue next week. The repurchase is, therefore, conditional on the
successful placement of the new notes.

Following the announcement, the Ukrainian 2019
Eurobond’s price increased to 105.9% this morning from 105.0% of par yesterday,
while the 2020 notes gained to 106.7% from 106.2%.

Alexander Paraschiy: This is a
wise move that will enable Ukraine to smoothen debt repayment schedule for
2019-2020, when Ukraine is due to repay totally about USD 12 bln.

We expect Ukraine will try issuing about USD 2 bln in
new notes with maturity in 5-7 years, and we see a possible yield of the new
issue to be close to 7.0%. If the maturity extension of the 2019 notes is
successfull, such an operation will significantly reduce Ukraine’s default
risk, as there will be reasonable expectations that Ukraine can repeat such
operation in the future.

We recommend all the holders of 2019 notes to offer them
to Ukraine.