Ukreximbank may need capital increase, considers Eurobond buyout, new CEO says
29 April 2020
The management of state-controlled Ukreximbank
(EXIMUK) is going to estimate its potential capital gap and discuss with its
supervisory board the possibility to ask the government for a capital increase
by the end of 2Q20, its newly appointed CEO Yevhen Metsger told the ucap.io
news site in an interview published on Apr. 28. The bank is also planning to
optimize the work of its regional branches and its liabilities portfolio,
Metsger said. Among the possible ways, the management is considering buying out
the bank’s Eurobonds that “pay interest of almost 10%” and
refinancing them by attracting loans from IFIs. Recall, in July 2015, as part
of its debt restructuring, Ukreximbank issued new sinkable Eurobonds for USD
750 mln due in 2022 and USD 600 mln due in 2025.
Alexander Paraschiy: It is hard
to imagine that the government and the central bank would easily agree to
increasing the bank’s capital amid the current economic difficulties, a lack of
liquidity in the state budget and a need to increase the government’s debt.
Though, some small capital injection to the bank looks possible this year.
Meanwhile, we believe the bank can make more effort to improve its operations
and work with NPLs so that it won’t need any capital injection.
The bank’s idea to buy back Eurobonds looks to be
efficient as soon as the bonds trade at a discount to par value. At the same
time, out of USD 750 mln of 2022 bonds, only USD 250 mln remain outstanding
(and more than USD 63 mln will amortize in October). Out of USD 600 mln of the
bank’s 2025 bonds, half will amortize in January 2021. Therefore, given the
bank’s slow decision-making process, it could happen that by the time it starts
repurchasing its bonds, there could be little to purchase, or the price of
bonds could exceed par value which would make the purchase politically
impossible.
In any case, we continue to believe the bank’s
Eurobonds should trade on par with Ukraine’s sovereign curve. So we remain
bullish on its bonds.
