Ukraine MinFin sees CITKIE bond restructuring similar to sovereigns
6 October 2015
Ukraine’s Finance Minister Natalie Jaresko announced on Oct. 5 that the Eurobonds of the city of Kyiv (CITKIE) will be restructured in the same way as the sovereign Eurobonds in the USD 24 bln debt operation. “It’s not necessary that the restructuring terms will be the same, but the restructuring of Kyiv’s notes will reflect these agreed upon terms,” she said, according to Interfax. Financial advisor Lazard stated that the holders of Kyiv city notes have already formed an ad hoc committee and negotiations have commenced.
Two issues of Kyiv’s bonds are currently outstanding: USD 250 mln notes maturing on Nov. 6, 2015, and USD 300 mln maturing on July 11, 2016.
Roman Topolyuk: Assuming that the restructuring terms will be similar to the sovereigns (in their effect on the bonds’ NPV), we argue that CITKIEs should be trading at narrower spreads to UKRAIN than they currently are. The ministry is actually acting as a negotiating side in the restructuring talks with the city’s creditors. This makes Kyiv’s risk profile similar to the sovereigns, while its notes are trading at compelling levels. In terms of price, CITKIE maturing in November 2015 is trading at 70.7 cents per dollar, compared to UKRAIN, maturing in October at 83 cents. The longer CITKIE bond is trading at 71.5 cents, compared to the UKRAIN bond maturing in June 2016 at 78.8. We recommend buying both municipal bonds, favoring the shorter one.
