26 October 2018
Ukraine’s Finance Ministry has completed its book
building for its new international bonds (UKRAIN), having raised USD 2 bln, the
Interfax news agency reported on Oct. 25, citing its anonymous sources. Based
on the sources, MinFin has set about a 9.0% rate for 5-year bonds (maturing in
February 2024), raising USD 750 mln; as well as a 9.75% rate for 10-year bonds
(maturing in November 2028), raising USD 1,250 mln.
Alexander Paraschiy: The results
imply Ukraine’s new 5-year bond was placed at a 25 bps spread to the existing
sovereign curve, while the spread of the 10-year bond is 45 bps. Proceeds from
the placement will cover most of Ukraine’s budget deficit for 2018, which is
planned at UAH 80 bln (or about USD 3 bln), but is likely to be smaller in
fact. In addition, it will help the nation to boost its gross international
reserves, which will return to a safe level of above three months of future
imports.
MinFin’s placement rate will be used as a benchmark for
the placement of the 5-year bonds of Naftogaz (NAFTO), which is likely to take
place in the nearest weeks. Taking into account that the spreads to sovereign
curve for the bonds of Naftogaz peers (e.g. state-controlled gas giants of
Russia and Kazakhstan) are 60-75 bps, it is likely that the Ukrainian state gas
company will have a yield for its bonds of 9.5%-9.8%, if the local bond market
and perception to Ukraine’s risk remain the same.