Ukraine places 13Y Eurobonds, buys 2021, 2022 Eurobonds at premium

24 July 2020

The Ukrainian government placed at par USD 2 bln in Eurobonds maturing in March 2033 at a 7.253% yield to maturity (YTM, priced on July 23) with the settlement expected on July 30, according to an announcement on MinFin’s website.

 

The government will use the total of USD 846 mln to buy back notes maturing in September 2021 (the principal of USD 435 mln at 104.5% of par) and 2022 (the principal of USD 371 mln at 105.5%), according to MinFin’s announcement at a stock exchange website. The settlement is expected on July 28.

 

The tendered bonds traded at 103.3% and 105.1% of par on July 21, the day before the tender offer announcement, according to Bloomberg. Currently, there are USD 1.409 bln of 2021 notes and USD 1.384 bln of 2022 notes outstanding.

 

Evgeniya Akhtyrko: The yield for the new notes Ukraine has placed – and the premiums for the outstanding notes it offered to buy – is comparable to those at its first, subsequently cancelled attempt at this liability management exercise in late June - early July, according to our assessment. Namely, the premium at which the government plans to buy back the 2021 notes, 1.2pp, is higher than the 0.9pp it offered on June 30, while the premium for the 2022 notes, 0.4pp, is lower than 0.6pp previously, based on our calculations. The YTM of the newly placed bonds is 0.05pp lower than the 7.3% that Ukraine obtained at the previous pricing in early July, while the yield spread with Ukraine’s existing September 2032 Eurobond amounted to about 0.1pp at the July 23 pricing, lower than 0.2-0.3pp previously, based on our calculations.

 

As a result, it's encouraging to see Ukraine’s government remedy the shameful situation with the cancellation of the Eurobond placement on July 2. Firstly, the market's reaction to the appointment of Kyrylo Shevchenko as NBU governor was neutral, which is a victory in itself considering several other candidates could have caused an extremely negative reaction. Secondly, the newly appointed NBU governor and President Zelenskiy restated that Ukraine will continue its cooperation with the IMF, while the independent status of the NBU will be preserved. Thirdly, the market apparently positively reacted to the NBU’s decision to keep the key policy rate unchanged at 6.0%, which became known several hours before the subscription book was closed.