Ukraine raises USD 1 bln from U.S.-guaranteed bond placement

Ukraine’s Finance Ministry completed a placement of five-year notes guaranteed by the U.S. for USD 1 bln, Deputy Finance Minister Yuriy Butsa reported on Sept. 22. The interest rate at the placement was 1.471%, or 30bp above the U.S. Treasury bond curve.

This was the third placement of U.S.-guaranteed bonds, with the first placement of five-year USD 1 bln bonds occurring in 2014 (at a rate of 1.844%, or 28bp spread to U.S. bonds) and in 2015 (at 1.847%, or 32bp spread).

Alexander Paraschiy: The placement of U.S.-guaranteed bonds, which is a part of the IMF-sponsored program of financial assistance, was an expected event after the IMF board approved the second review of its program with Ukraine on Sept. 14. As part of the program, Ukraine may also receive a EUR 0.6 bln loan from the European Union soon, providing providing the EU is satisfied with recent progress on Ukraine’s energy legislation (including yesterday’s approval of a new law on the utility sector regulator and a draft law on electricity market reform, passed in the first reading).

The bond placement proceeds will enable the government to finance the budget deficit, as well as boost Ukraine’s gross international reserves, which we expect will reach USD 15.4 bln as of end-September (up from USD 14.1 bln as of end-August).