Ukrainian Railway signs USD 150 mln loan agreement with EBRD

Ukrainian Railway (RAILUA) and the EBRD signed on Nov.
9 a USD 150 mln loan agreement to purchase freight railcars, both entities
reported the same day. The loan will be provided for ten years with a two-year
grace period and equal semi-annual repayments afterwards, Ukrainian Railway
clarified. The tender for the purchase of gondola railcars under the contract
has been already announced, the company said. Railcar deliveries under the
project are expected to start this year and extend for six months.

The EBRD clarified that the company is going to
purchase up to 6,500 railcars under the loan program. They will help the
company to improve its efficiency and reduce greenhouse emissions, the bank
stated, estimating an annual saving of up to 80 kt of carbon dioxide. Besides
that, the loan project will be combined with corporate governance reform at
Ukrainian Railway and its subsidiaries.

In 2018, Ukrainian Railway was planning to acquire
7,150 new freight railcars (of which 7,050 are gondola cars), including 3,600
units to be produced at the company’s facilities and 3,000 units to be
purchased using financing from an international financial organization. In its
business plan, the company was expecting to attract UAH 2.85 bln (USD 100 mln)
in loans from an international financial organization in 2018.

Alexander Paraschiy: The loan is an expected event, planned back in 2017, while its size is
bigger than planned. In general, EBRD financing is recognition that Ukrainian
Railway’s reforms of corporate governance and its procurement system are going
in the right way. All this maintains our neutral view on RAILUA Eurobonds.