Ukraine to issue new VAT bonds

Ukraine to issue new VAT bonds



23 травня 2014 года
Конкорд Капитал

Ukrainian government has resolved on May 21 to issue local hryvna nominated 5-year bonds that will be used to repay overdue VAT compensation to Ukrainian exporters. According to the resolution, the companies eligible to receive redemption of VAT will have two month to submit their claims and get them approved. VAT bonds will have semi-annual payments which include coupon and a 10% of principal redemption. Preliminarily, the government expects that the first tranche of the issue may reach UAH 5-7 bln (USD 400-600 mln).

Roman Topolyuk: VAT bonds, to be issued in Ukraine for the second time, will positively impact the liquidity position of Ukrainian exporters. Most of them have accumulated considerable amount of overdue VAT receivables.

Iron ore pellets producer Ferrexpo (FXPO LN) estimates that it will be able to receive VAT bonds in equivalent of USD 117 mln (53% of total VAT receivables). Sunflower oil producer Kernel (KER PW) has accumulated around USD 170 mln in VAT tax for reimbursement, we estimate, based on the UAH/USD exchange rate of 10.95, as of end March. Poultry producer MHP (MHPC LI) has accumulated around USD 120 mln in current taxes recoverable, as of end 1Q14.

The core problem of VAT bonds is that their initial YTM (coupon rate) will be limited to NBU discount rate, which is 9.5% currently. But the market for such bonds is at about 20% YTM, which suggests the discount at which the companies will be able to sell the will be close to 20%. This implies the companies will have to write down about 20% the portion of VAT receivable that will be compensated by the bonds. This will have a negative on-off effect on their P&L.

Источник: Конкорд Капитал

Аналитик: Роман Тополюк
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