Ukraine completes tap issue of 2033 bond at 6.2% yield

Ukraine’s finance ministry issued additional bonds due
in March 2033 for USD 600 mln, according to its Dec. 11 report. The tap issue
was priced at 108.914% of par, implying 6.20% YTM. The yield was the lowest in
the history of Ukraine’s public USD Eurobond offerings, Finance Minister Serhiy
Marchenko stressed.

Settlement on the additional bond is expected on Dec.
18. The proceeds will be used to finance general budget needs.

The 13-year Eurobond for USD 2 bln was initially priced at 7.253% YTM on July 23.
The spread of the initial placement to the U.S. treasury curve was 662 bps,
while it was 525 bps for the tap issue.

Alexander Paraschiy: The
successful completion of this long-awaited issue allows MinFin to significantly
improve its liquidity and pay off most of its planned expenditures for
December. Namely, this placement, as well as the recently provided EUR 600 mln loan from the EU,
cover about 40% of MinFin’s USD 3 bln financing needs for December, as earlier announced by PM Denys Shmyhal.
The rest is likely to be filled with the placement of local government bonds.

As a fly in the ointment, the new bond’s long
tenure indicates MinFin is not sure whether the government will be able to
secure IMF lending in the coming months. Otherwise, aiming at minimizing debt
service costs, MinFin would have tried to issue a short-term loan on the
market. Moreover, the success of such a placement, in and of itself, could be
played to postpone the next IMF loan tranche as the government won’t feel an
urgent need in such a deal.