Ukraine gov’t prioritizes 2015 Eurobonds in its exchange offer

The Ukrainian government released this morning its exchange offer for its state Eurobonds, amended from what it previously announced. In particular, the holders of the 2015 notes (maturing on Sept. 23 and Oct. 13) will get priority treatment as their notes will be exchanged only into new 2019 notes. Before that, MinFin suggested it will issue an equal amount of nine notes, each maturing in a subsequent year between 2019 and 2027, with all the holders of the current notes receiving equal portions in the new notes.

Now the holders of state notes maturing in 2016-2023 will receive proportionally smaller amount of new notes maturing in 2019, and more new notes maturing in 2020-2027.

Alexander Paraschiy: This decision clearly makes the UKRAIN 2015 notes today’s hottest item. However, this precedent of preferential treatment looks dangerous, given that MinFin insisted earlier there would be no preferences. In our view, such an outcome weakens Ukraine’s bargaining position with Russia on restructuring its USD 3 bln Eurobond.