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Adamant Capital (Ukraine): Naftogaz’s 5 year $500mln bonds have been preliminarily priced at 10.9%

November 13, 2018 | Cbonds

Naftogaz’s 5 year $500mln bonds have been preliminarily priced at 10.9%. The guidance has been reported by Bloomberg, quoting an anonymous source.
Our view: The offer looks even more attractive for investors than we had predicted last week, though partially as a result of sovereign note weakness over the period. As mentioned earlier, Naftogaz is strategically important for Ukraine and is thus characterized by a risk profile essentially equivalent to that of the state. Its largest weakness – the sustainability of transmission profits (threatened by both Russian volumes going via Nord Stream 2 and a potential unbundling) should eventually be compensated by higher gas tariffs for the population, which should reach market levels by January 2020 (as per the recent agreement with the IMF). Of note is that the company is currently losing c. $210 per 1000 m3 of gas sold under price controls (taking the latest hike into account), which is equivalent to some $3.3bln or double the size of its current transmission EBITDA. All in all, we preliminarily place a ‘Buy’ recommendation on Naftogaz’s upcoming notes.

Company: Adamant Capital (Ukraine)

Full company nameAdamant Capital (Ukraine)
Country of riskUkraine

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