Ukraine places a USD 1 bln U.S.-guaranteed Eurobond

Обзор облигаций 16.05.2014 Ukraine placed a USD 1 bln 5-year Eurobond under U.S. government guarantees on May 14, Interfax-Ukraine reported. The yield of the bonds was not released; however, according to Interfax it was 28 basis points above the U.S. Treasuries yield (which was 1.52% on May 15). Earlier this month, the government set a maximum coupon rate on such bonds at the level of 2.9%. Alexander Paraschiy: We have another portion of positive news for financial accounts. With all the money received or committed so far, Ukraine will be in a position to cover all external debts over the upcoming months and even cover payables to Gazprom. In particular, Ukraine has already received USD 3.2 bln from the IMF, some large part of the EUR 1.6 bln from the EU is about to arrive, and we now have an extra USD 1 bln received from Eurobonds sale. The funds are more than enough to pay the USD 1.0 bln Eurobonds due in June, to cover the USD 2.2 bln debt to Gazprom for 1Q14, and even to pay back the USD 1.8 bln to the IMF due between May and December of this year. All in all, we do not see any problems with Ukraine’s solvency over the nearest future. Still it is not clear when the new funds, arriving in Ukraine, will have a positive effect on forex market. As we see it, disregarding the shrinking trade deficit and improving capital flow to the country, the hryvnia remains underpriced. The NBU does not rush to pour more dollars into the forex market for strengthening the currency, while funds from the IMF apparently are kept for external redemptions. Still, we believe the hryvnia is bound to strengthen quite soon when more technical support funds and investments arrive in the country, and as long as conflicts in eastern Ukraine calm down. We are keeping our forecast for the hryvnia rate at 10.5/USD by the year-end.