Ukreximbank yet to muster funds to repay its April Eurobond, Fitch says

Fitch Ratings confirmed its “CCC” rating for the Eurobonds of State Export-Import Bank of Ukraine (Ukreximbank, EXIMUK) and State Savings Bank of Ukraine (Oschadbank, OSCHAD), according to its Jan 26 report. The ratings agency admitted that the state banks’ capital positions are “somewhat better” than at other Ukrainian banks, while also stressing that their foreign currency liquidity positions are tight.



As of the reporting date, Ukreximbank has not yet accumulated sufficient foreign currency liquidity to repay its nearest Eurobond in full (USD 750 mln, maturing on April 27), Fitch also reported. The bank informed Fitch on its plans to draw additional foreign currency from loan repayments in 1Q15. “The bank would be reliant on open market purchases or the availability of foreign currency liquidity from the National Bank of Ukraine” if deposit repayments are lower than expected or foreign currency deposits continue to flow out, the agency warned. Oschadbank will also need to accumulate additional foreign currency liquidity in order to repay its USD 600 mln Eurobond maturing in March 2016, according to the Fitch report.



Alexander Paraschiy: Ukreximbank’s USD 750 mln debt due in three months accounts for 16% of its total foreign currency assets (which were USD 4.6 bln as of end-9M14). In the environment of the foreign currency deficit in the country, it’s not easy for the bank to get any dollars from its debtors to be able to accumulate such an amount. We are also afraid that a significant portion of the bank’s dollar liquidity is locked in government’s dollar-denominated bonds (Ukreximbank is one of the biggest holders of this debt instrument). Given the country’s critically low foreign currency reserves, the government usually refinances the repayment of such bonds via issue of new dollar bonds. This means Ukreximbank’s “dollar liquidity” could be not very “liquid”.



Theoretically, the bank can buy some dollars from the central bank to replenish its liquidity (especially given that money from the IMF and other donors is very likely to enter Ukraine in March, well before Ukreximbank’s repayment date). However, such support from the central bank does not look guaranteed. All in all, we share the view of Fitch analysts that it would be a real challenge for Ukreximbank to accumulate enough money for the April 27 repayment.



We also note that Oschadbank is much less exposed in foreign currency operations, as compared to Ukreximbank. The USD 600 mln debt repayable in March 2016 accounts for 23% of the bank’s total foreign currency assets. For this bank, it will be an even greater challenge to accumulate dollar liquidity if the situation in Ukraine does not improve.

Источник: Конкорд Капитал