Ukraine issues new Eurobonds worth USD 11.95 bln, VRIs at USD 2.92 bln



12 ноября 2015 года
Конкорд Капитал

Ukraine’s Cabinet of Minister approved on Nov. 11 an issue of GDP warrants and nine series of new Eurobonds as part of its debt operation. Each of the newly issued bonds will have a coupon rate of 7.75%, paying semi-annually with the first payment due March. 1. Each series will mature in one-year intervals starting Sept. 1, 2019 and finishing Sept. 1, 2027. The total par value of the new Eurobonds is USD 11.951 bln, which would be nearly equally split between the nine series, with the smallest one being USD 1.155 bln (maturing in 2019) and biggest one being USD 1.531 bln (maturing in 2020).

As part of the debt operation, the government is also issuing value recovery instruments, or GDP warrants, at a total par value of USD 2.916 bln. Ukraine may issue the new GDP warrants to exchange them for a partial write-off of its other international obligations. As earlier agreed upon, the warrant holders will be eligible to receive parts of their total payments in 2021-2040 that are linked to Ukraine GDP perftomnce in 2019-2038. Totyal payments under VRIs will be equal to 15% of Ukraine’s excess GDP in case its real GDP growth is higher than 3%, and equal to 40% of excess GDP if the real growth is above 4%. Annual payments under warrants won’t exceed 1% of Ukraine’s GDP in 2021-2025.

Meanwhile, the 13 issues of old government Eurobonds (UKRAIN, UKRINF) at a total value of USD 15 bln are recognized as cancelled. The holders of the old notes who failed to exchange them for new issues have 150 days to complete their exchange. Therefore, of all the old issues of government Eurobonds, a single issue of USD 3 bln, maturing in December 2015, remains outstanding.

Alexander Paraschiy: At this stage, the holders of 3% of old Eurobonds still failed to exchange their paper for the set of new bonds (of a total par value of USD 0.36 bln, we estimate) and derivatives. In addition to this, Ukraine may issue more new Eurobonds maturing in 2019 and 2020, as well as GDP warrants, if it secures the restructuring of USD 0.55 bln in Eurobonds of Kyiv city (CITKIE).

The key question now is how will the market price Ukraine’s GDP warrants. For example, comparable paper of Argentina, issued in 2010, was initially priced at 51% of its par value, while now it trades at 9.75%. Unlike their Argentinian peers that have no cap on total payments, Ukraine’s warrants clearly deserve some better pricing. Our estimates suggest that the total NPV under Ukrainian warrants, using the 10% discount rate and based on the assumption that Ukraine’s dollar GDP will growth at 7% CAGR, could exceed USD 3.5 bln. That’s much more than the current total par value of the instrument. However, we understand that given the payments under these instruments are not secured at all, and they can only start in 2021, their price at their initiation is unlikely to exceed 50% of their par value.

Источник: Конкорд Капитал



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