Ukraine

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13:34 PM Monday, November 20, 2017
Finance
Debt Crisis Fades as Ukraine Plans Eurobond Return
Ukraine plans sale of first Eurobonds since 2015 restructuring ; Floodgates about to open in emerging-market sales: Pinebridge
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

By Natasha Doff and Lyubov Pronina

Ukraine is taking advantage of a surge in appetite for high-yield debt to make its first return to Eurobond markets since a $15 billion restructuring in 2015.

The eastern European nation has mandated JPMorgan Chase & Co., Goldman Sachs Group Inc. and BNP Paribas SA for the sale of dollar-denominated sovereign bonds, according to three people familiar with the situation, who asked not to be cited because details are private. Rothschild & Co. is advising on the deal, the people said.

Ukraine is joining other junk-rated borrowers in making the most of the lowest emerging-market borrowing costs in four years to sell new dollar debt. Argentina convinced investors to buy 100-year debt in June, Iraq last month tightened pricing on a $1 billion Eurobond sale after orders were oversubscribed and Tajikistan is planning a debut sale later this month.

“Issuers view now as a good time to test investors’ cash levels and underlying risk appetite,” said Anders Faergemann, a senior fund manager in London at PineBridge Investments, which oversees about $80 billion globally. “The floodgates may be about to open in terms of new supply in emerging markets.”

The yield on Ukrainian bonds due in 2019 dropped 33 basis points on Wednesday to a post-restructuring low of 5.16 percent, heading for the biggest daily drop since March.

Restructuring

The former Soviet nation relied heavily on foreign funding to finance its debt until a revolution and military conflict in 2014 curbed its market access and drained reserves, forcing the country to ask creditors for debt relief. Bondholders including Franklin Templeton accepted a 20 percent writedown and a four-year freeze on repayments in 2015.

The only creditor that didn’t accept the restructuring is Russia, which bought a $3 billion Eurobond from Ukraine in December 2013, months before relations between the two countries soured. Although a London court threw out Ukraine’s arguments for non-payment in a preliminary verdict this year, Russia can’t block future issuance because the debt restructuring documents isolated holdouts.

“Ultimately the view is that the $3 billion bond issue will be settled in some sort of bilateral negotiations with Russia, and should not affect Ukraine’s ability to tap the markets,” said Konstantin Kucherenko, a Kiev-based bond-trader at Dragon Capital.

Under Pressure

Ukraine is under pressure to come to the market because it has more than $1 billion a year of debt to service between 2019 and 2027. The International Monetary Fund, which has been giving the country installments in a $17.5 billion bailout since 2015, foresees the nation selling $1 billion of bonds this year, $2 billion in 2018 and $3 billion in 2019, according to a staff report published in April.

Simon Quijano-Evans, a strategist at Legal & General Investment Management Ltd. in London, sees high enough investor demand for Ukraine to raise up to $2 billion in the forthcoming sale.

“Ukraine Eurobond issuance is probably the most anticipated by the market this year,” he said. “Investors are eager to see Ukraine using the window of opportunity to lengthen the maturity of its short-term debt.”

— With assistance by Marton Eder, Daryna Krasnolutska, and Volodymyr Verbyany


Slider Photo: Prime Minister Volodymyr Groysman acknowledges applause after addressing the Verkhovna Rada on Wednesday. (UNIAN)


Posted Sept. 7, 2017

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