Ukrzaliznytsia Eurobonds successfully restructured

At their Feb. 17 meeting, the bond holders of railway monopoly Ukrzaliznytsia approved a restructuring of the company’s Eurobonds (RAILUA). Following the approval, all the bond holders will get new bonds (with extended maturity) for each old one.

The new notes will have a final maturity date of Sept. 15, 2021 and an amortization schedule (vs. a bullet repayment on May 21, 2018 for the old notes). 30% of the new notes will be repaid on Mar. 15 and Sept. 15 of 2019, and 10% of the bond will be repaid semi-annually between Mar. 15, 2020 and Sept. 15, 2021. The coupon rate on the new bond will be 9.875% (up from 9.5%), to be paid semi-annually. The first coupon period on the new notes starts on Nov. 21, 2015 (the date of the payment of the last coupon on the old bond) and ends on March 15, 2016.

Alexander Paraschiy: At the price of 83% of par, RAILUA bond offers 16.9% yield to its extended maturity. That means Ukrzaliznytsia’s paper trades with 540 bps spread to sovereign curve and with 300-400 bps spread to the bonds of state banks. While we remain skeptical of the long-term sustainability of Ukrzaliznytsia, we believe the spread of its debt securities should be narrower today. We confirm our bullish short-term view on RAILUA.