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Concorde Capital Research: Ukraine central bank confirms completion of local state debt restructuring

October 10, 2017 - Cbonds

 

The National Bank of Ukraine reported on Oct. 9 it completed the restructuring of UAH 219.6 bln in local currency sovereign bonds it holds. Of the total amount, UAH 74.4 bln in bonds will have a fixed coupon rate and UAH 145.2 bln will have a rate linked to inflation. The restructuring “will facilitate a balanced fiscal policy consistent with the NBU's goals of ensuring low and stable inflation,” according to the central bank.

Recall, MinFin reported on Oct. 4 it agreed to the key conditions of restructuring these bonds with the extension of their maturity from 2017-2030 (with over 70% of bonds maturing in 2017-2020) to 2025-2047, with a relatively uniform annual repayment schedule. The new bonds maturing in 2025-2035 have a fixed coupon rate of 8.12%-11.30%, with the longer bonds’ coupons equal to trailing CPI plus 2.2pp.

Alexander Paraschiy: After the central bank's comments, we can state with certainty the deal is done. Recall, the previous restructuring deal, nearly agreed upon in May 2017, was unexpectedly cancelled in August.

While we see little fiscal effect on the deal beyond 2017, we agree with the central bank that it will allow it to target inflation more efficiently. In particular, we see that high inflation of the last year, which exceeded the NBU’s expectation, was partially the result of state policy, in which some regulated prices were adjusted. In the future, the government will be interested in minimizing inflation (to save some interest expenses), so, theoretically, it will be more cooperative with the NBU in its goal to control prices.
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Cbonds page: Ukraine
Issuer profile:

Ukraine is a country in Eastern Europe. It has an area of 603,628 sq km, making it the largest country entirely within Europe. The country is home to 45.4 million people.

Outstanding issues:
30 issuesUSD26,047,041,000
1 issuesEUR141,320,000
314 issuesUAH820,720,070,000
Issuer rating:
RIA RatingD/Sovereign ratings10/09/2015
Dagong CreditCC/NegativeInternational scale rating (foreign curr.)07/17/2015
Dagong CreditCC/NegativeInternational scale rating (local curr.)07/17/2015
Organisation for Economic Co-operation and Development (OECD)7/Country Risk Classifications06/24/2016
Moody's Investors ServiceCaa2/PositiveLT- foreign currency08/25/2017
Moody's Investors ServiceCaa2/PositiveLT- local currency08/25/2017
S&P Global RatingsB-/StableForeign Currency LT10/19/2015
S&P Global RatingsB-/StableLocal Currency LT10/19/2015
S&P Global RatingsuaBBB-/LT National Scale (Ukraine)10/19/2015
Fitch RatingsB-/StableLT Int. Scale (foreign curr.)04/28/2017
Fitch RatingsB-/StableLT Int. Scale (local curr.)04/28/2017
Fitch RatingsWithdrawn/National Scale (Ukraine)09/02/2011
Rating Agency RAEX (Expert RA)Withdrawn/Foreign curr. scale07/04/2016
Rating Agency RAEX (Expert RA)Withdrawn/Local curr. scale07/04/2016
National Rating AgencyiSD/NegativeGlobal scale09/30/2016
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