Ukraine to borrow EUR 250 mln from Cargill

Ukraine’s Cabinet approved on Nov. 8 a resolution to
take out two loans from Cargill Financial Services International for a total
amount of EUR 250 mln, it reported the next day.

The loan will be taken in two tranches: for three
years (at 5.15% rate) and for five years (at 5.85%). Interests will be paid
quarterly.

Alexander Paraschiy: Borrowing
from Cargill has become a tradition for the Zelensky government. Two 
loans, EUR 250 mln each, were taken out in October 2019 and September 2020.
Recall, last year, Ukraine decided in July to attract 3Y and 5Y
loans from Cargill at 5.15% and 6.25% rates.

This year’s borrowing looks rather expensive for the
government, compared to its Eurobond curve. For instance, the 5Y sovereign
curve for EUR-denominated international bonds is at 4.95% YTM now, implying
that the spread of Cargill’s 5Y loan would be 90 bps (vs. 5 bps last year, we
estimate).

Anyway, the new borrowing is a positive development
that will allow the Ukrainian government to decrease its supply of new local
bonds in late 2021, thus enabling it to count on lower costs of domestic
borrowing.