Naftogaz places USD 500 mln Eurobond at 7.625%

State natural gas producer and transiter Naftogaz of
Ukraine (NAFTO) is placing 7-year international bonds and has already set
interest rate at 7.625%, the compamy reported on Nov. 5. Demand for the paper
exceeded supply by 2.9x, the company said. The spread to sovereign curve for
the new issue is 127 bps, Naftogaz estimates, which is the lowest spread for
all quasi-sovereign issues made this year. Recall, Naftogaz issued two Eurobonds in early July, including
USD 335 mln of 3-year bonds at the rate of 7.375% (about 154 bps spread to
sovereign curve) and EUR 600 mln of 5-year bonds at 7.125%.

Alexander Paraschiy: The
announced placement rate is better than the range we estimated last week,
so the deal is a real success. Even with the placement of the new Eurobond,
Naftogaz’s leverage remains solid: its total debt to LTM EBITDA is just 0.8x,
based on its latest financial results
and the current exchange rate. We continue to believe NAFTO Eurobonds bear the
same risk as sovereign paper, and therefore the notes should be traded with a
minimal spread to the sovereign curve.