Ukrainian Railways prices 5Y Eurobond at 7.875%

Ukrainian Railways (RAILUA) has priced its new
Eurobond issue for USD 300 mln maturing in five years, acting CEO Ivan Yuryk
reported on July 8. Based on pricing results, the bond will be issued with a
yield of 7.875%, which Yuryk called a historically low rate for the company. Ukrainian Railways will direct all the attracted money to
refinancing its existing debt, thus decreasing the average cost of debt for the
company, he commented.

Alexander Paraschiy: The
placement was vital for the company which has felt difficulties with liquidity
over the last year, so the creditors seem to be taking advantage of this. The
placement rate implies a spread to the sovereign curve of 247 bps, which looks
too high for a quasi-sovereign issuer. Two years ago, Ukrainian Railways issued
a new bond with a 155 spread to the
sovereign curve. In fact, this is the third-worst issue spread in Ukraine’s
quasi-sovereign universe over the last ten years (after the 2013 placements of
Oschadbank in March and Ukrainian Railways in May). And this is way above an
upper bound of our expected placement range (7.20%).

In any case, the placement is a positive event for
the holders of other RAILUA bonds as it decreases liquidity risk and allows the
issuer to count on some upgrade of its credit ratings. We remain neutral on the
company’s bonds.