Ukreximbank bondholders vote to extend maturity by three months

By bne IntelliNews April 28, 2015

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Holders of state-owned Ukreximbank's $750mn Eurobond have agreed to a three-month extension of the bond set to mature on April 27, buoying hopes that  Kyiv will be able to restructure $15bn in sovereign debt by June.

“An overwhelming majority” of the bondholders approved the extension to July 27, the bank said in a statement. “We are grateful to noteholders for their overwhelming support that they have shown at the noteholders’ meeting,” Ukreximbank CEO Oleksandr Hrytsenko said, adding that the bank would now continue talks with bondholders about restructuring according to terms Ukreximbank announced on April 21.

Kyiv has to restructure $15bn in sovereign debt by June in order that the country can receive the full $17.5bn bail-out package agreed with the International Monetary Fund (IMF) earlier this year. Ukreximbank’s $750m bond is the first due for repayment out of 29 bonds and loans that Ukraine hopes to renegotiate over the next four years. 

Ukraine's ministry of finance welcomed the news, which comes after bleak weeks of trying to engineer solutions for Ukraine's foundering economy, and fears of a re-escalation in the armed conflict in the country's East.

“Bondholders voted with full knowledge of the proposed re-profiling terms, which are fully in line with the goals of the IMF-supported program,” the ministry said, also reminding all parties involved of the June deadline for completion of the debt restructuring.

The restructuring terms on offer to Ukreximbank bondholders as announced on April 21 envisage a maturity extension of seven years for half of the debt, and of four years for the rest of the debt, and a hike in the coupon rate by 1.25% to 9.625%.

According to earlier ministry statements, restructuring of the quasi-sovereign debt of state-owned banks will benefit from softer terms than those to be applied to the sovereign debt.

The finance ministry said: “Contrary to Ukreximbank's operation [of debt restructuring] which had to contribute only to liquidity targets, sovereign debt restructuring will also need to reduce debt levels and debt service”.

Analysts said the country's finance chiefs will now try to fend off any presumptions by sovereign debt holders that they stand to similarly benefit as the holders of Ukreximbank's Eurobond holders.

“I think the [ministry] is eager to moderate expectations that the softer deal for Ukreximbank will act as the framework now for the sovereign deal, and perhaps encourage bondholders to negotiate more aggressively in the sovereign restructuring,” writes Tim Ash of Standard Capital.

Prices on Ukrexim debt surged following the announcement of restructuring terms. But analysts see further growth as unlikely.

"The bank decreased cash and equivalents quarter on quarter to $820mn from $960mn in the first quarter of 2015," says Ihor Putilin, head of research at brokerage Art Capital. "Its regulatory capital adequacy more than halved to 10.85%. Due to massive depreciation of the hryvnia in 1Q15 Ukreximbank had to provide additional UAH12.3bn to reserves for depreciation of loans."

Putilin concluded: "Further appreciation of the Ukreximbank 2015 Eurobond is restrained by the risks of Ukraine sovereign restructuring and disorderly default. In this case Ukraine has to impose moratorium on debt servicing of all sovereign and quasi- sovereign bonds." 





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