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Concorde Capital Research: Ukreximbank may need capital increase, considers Eurobond buyout, new CEO says

April 29, 2020
The management of state-controlled Ukreximbank (EXIMUK) is going to estimate its potential capital gap and discuss with its supervisory board the possibility to ask the government for a capital increase by the end of 2Q20, its newly appointed CEO Yevhen Metsger told the ucap.io news site in an interview published on Apr. 28. The bank is also planning to optimize the work of its regional branches and its liabilities portfolio, Metsger said. Among the possible ways, the management is considering buying out the bank’s Eurobonds that "pay interest of almost 10%" and refinancing them by attracting loans from IFIs. Recall, in July 2015, as part of its debt restructuring, Ukreximbank issued new sinkable Eurobonds for USD 750 mln due in 2022 and USD 600 mln due in 2025.

Alexander Paraschiy: It is hard to imagine that the government and the central bank would easily agree to increasing the bank’s capital amid the current economic difficulties, a lack of liquidity in the state budget and a need to increase the government’s debt. Though, some small capital injection to the bank looks possible this year. Meanwhile, we believe the bank can make more effort to improve its operations and work with NPLs so that it won’t need any capital injection.

The bank’s idea to buy back Eurobonds looks to be efficient as soon as the bonds trade at a discount to par value. At the same time, out of USD 750 mln of 2022 bonds, only USD 250 mln remain outstanding (and more than USD 63 mln will amortize in October). Out of USD 600 mln of the bank’s 2025 bonds, half will amortize in January 2021. Therefore, given the bank’s slow decision-making process, it could happen that by the time it starts repurchasing its bonds, there could be little to purchase, or the price of bonds could exceed par value which would make the purchase politically impossible.

In any case, we continue to believe the bank’s Eurobonds should trade on par with Ukraine’s sovereign curve. So we remain bullish on its bonds.
Company — Ukreximbank
  • Full name
    Joint Stock Company "The State Export-Import Bank of Ukraine"
  • Registration country
    Ukraine
  • Industry
    Banks