Ukraine places USD 3 bln, 15Y Eurobond at 7.375%

Ukraine’s Finance Ministry announced on Sept. 18 it
successfully placed new Eurobonds at a total amount outstanding of USD 3 bln at
a coupon rate of 7.375%. The bonds will have ultimate maturity on Sept. 25,
2032 and will be amortized in four equal semi-annual installments starting
March 25, 2031. Of the funds attracted, about USD 1.68 bln will be directed to
buy out some of Ukraine’s Eurobonds (UKRAIN) maturing in 2019 and 2020, and the
rest will be used to finance the Ukrainian budget’s spending.

Alexander Paraschiy: This was
the first market placement of Ukraine’s sovereign Eurobond since April 2013 and
the longest one in Ukraine’s history. Also, its rate was the lowest since
mid-2011, so we can claim the placement was successful. Overall, the coupon rate
is within our expected range of 7.00%-7.75%, while the amount raised exceeds
our expectation of USD 2 bln. This indicates there is demand for Ukraine’s debt
globally and promises that the country will be able to further issue new debt
once it needs to refinance older issues. We expect a positive reaction from the
bond market on the news.

The successful placement – coupled with partial
repayment of older Eurobonds – would enable Ukraine to raise its gross reserves
by USD 1.3 bln, which is above our earlier expectation of a USD 0.5 bln
contribution from the new bonds. Nevertheless, we are keeping our estimate of
Ukraine’s end-2017 gross reserves at USD 18.5 bln (still anticipating a USD 1
bln loan tranche from the IMF), as we see Ukraine will raise less dollar debt
domestically by the end of the year.