Ukraine to place $1bn Eurobond

By bne IntelliNews August 28, 2012

bne -

The government of Ukraine announced plans to issue a $1bn eurobond to shore up public finances and refinance a 2010 loan from Russian state-owned bank VTB. The bond will mature in 2014 with an annual coupon of 7.95%, according to a statement on the cabinet's website published on August 27.

The debt will be used to refinance the remainder of a $2bn loan from Russia's VTB Group that was issued in 2010 for six months and has already been extended three times. Ukraine issued a $2bn eurobond in July, half of which was used to pay down the loan. Reports at the time suggested that VTB itself had bought most of that issue.

Stanislav Zelenetsky at Art Capital points out: " At the beginning of the summer, the government for the first time mentioned issuing $1bn of new Eurobonds to partially refinance its $2bn debt to VTB. At that time, the head of VTB, Andrey Kostin, pledged the bank would sell the new Ukrainian eurobonds on the secondary market. We believe VTB's plans are still valid. The new issue being on the Ukraine sovereign curve, VTB has good chances of selling the bonds at the nominal price. However, doing so may put downward pressure on Ukrainian eurobond prices."

The ongoing rollover of the Russian debt illustrates the efforts of the cash-strapped government to stave off devaluation of the hryvnia. Kyiv's international reserves remain dangerously close to the three months of import cover that economists say is the minimum needed to maintain currency stability.

The National Bank of Ukraine stated that the hryvnia's exchange rate has grown 12.9% year on year against the currencies of Ukraine's major trading partners on August 27. However, that buoyancy is heavily dependent on the central bank's support of the currency ahead of parliamentary elections in October, allowing the hryvnia to follow the US dollar higher.

Analysts at Foyil worry that the current trend is only setting Ukraine up for a bigger fall following the vote, while also holding back potential economic growth. "Nominal strengthening of the national currency is negatively impacting Ukraine's trade balance, leading to moderation of inflation," they write. "However, such a tendency creates an additional ground for devaluation of hryvnia after the ... elections. Some nominal correction of the exchange rate will be required to cope with Ukraine's widening trade deficit and thereby to boost price competitiveness of export industries."

Related Articles

Ukraine's largest PrivatBank faces down nationalisation fears

Graham Stack in Kyiv - Ukraine's largest lender PrivatBank has survived a stormy week of speculation over its future, but there are larger rocks ahead, with some market participants anticipating the ... more

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss