Ukrainian Railway considers options to repay Eurobond

Ukrainian Railway (RAILUA) may enter the international
bond market in the beginning of 2019 to accumulate funds for the repayment next
year of USD 300 mln in amortization on an existing Eurobond, the company’s top
manager Yevhen Kravtsov told Bloomberg News, as reported on Dec. 3. He said he
hopes the situation may become more favorable for a Ukrainian issuer by then,
after Ukraine receives the next IMF loan tranche and in case of de-escalation
of tensions with Russia.

Alternatively, the company is considering syndicated
or bilateral international borrowing, or borrowing on the domestic market. If
that doesn’t work, the company will decide to cut its investment program for
the next year to accumulate enough funds for the bond repayment, Kravtsov said.
The company’s 2018 financial plan preliminarily estimates its 2019 capital
expenditures at UAH 32.5 bln (over USD 1.1 bln).

In 2018, the company expects to spend UAH 16.4 bln for
capital expenditures, vs. UAH 26.9 bln foreseen by the financial plan, the company’s
CFO Andriy Riazantsev told a European Business Association meeting on Nov. 28,
as reported by biz.liga.net news site.

Recall, Ukrainian Railway’s USD 500 mln Eurobond will
have two large amortization payments in March and September next year, USD 150
mln each.

Alexander Paraschiy: So far,
international bond markets are not looking favorably upon the Ukrainian issuer,
and the nearing presidential elections – which create additional uncertainty –
won’t improve their confidence. Domestic borrowing in hard currency could also
be a hard task for the company. The most likely lenders, two Ukrainian state
banks, are also facing large amortization payments on their Eurobonds in
March-April 2019.

Therefore, the options of private international borrowing
or using own cash from reduced investment remain the most viable for the
company to accumulate cash for next year’s debt repayment. We believe the
company won’t have trouble with repayments, keeping our neutral view on the
RAILUA Eurobond.