We constantly maintain a high level of our investor relations, which allows us to conduct transactions without roadshows - Yuriy Butsa, Government Commissioner for Public Debt Management of Ukraine
August 11, 2020
|An exclusive commentary by Yuriy Butsa, Government Commissioner for Public Debt Management, on the placement of a new issue of sovereign Ukrainian Eurobonds in the amount of USD 2 billion and switch tender offer of Eurobonds to be redeemed in 2021 and 2022.|
Why did the Ministry of Finance of Ukraine refuse to hold a roadshow event?
We constantly maintain a high level of our investor relations, which allows us to conduct transactions without roadshows, as it was in January this year. In addition, given Covid-19 pandemic and quarantine, there is no possibility to hold traditional roadshows, and all transactions in the market are now conducted in this format.
The planned bond placement in early July was canceled after the pricing announcement. How did it affect the demand? Did any of the potential buyers refuse to participate in the transaction or, on the contrary, sign on to it?
We believe that the decision to cancel the bond placement and give a chance for the market players to assess the significance of the news that came out right after the pricing was reasonable and positive with respect to the investors. We did not observe considerable changes in the demand apart from the increase in the number of bonds offered for switch tender, which reflects the desire of some investors to get a guaranteed allocation in the new-issue bonds.
The new bond yield amounted to 7.25%, which is 5 bps lower than the yield of the canceled issue. What lies at the bottom of it?
Relatively high demand for the new issue of Ukrainian long Eurobonds and favorable market conditions made it possible for Ukraine to mark out new securities on slightly better terms.
What was the aggregate demand? What was the volume of "new money" and how much funds were raised due to the exchange of "old" bonds with a maturity in 2020 and 2021?
The total indications of interest for the new issue and tender offer peaked in excess of U.S.$7 billion from over 200 investors globally. USD 871 million out of raised USD 2 billion were used to purchase Ukraine’s existing senior notes due 2021 and 2022 tendered in connection with the switch tender offer. All the rest – about USD 1.128 billion – are the funds to be used to finance the government budget.
What is the geographical and institutional structure of buyers?
Investors from the USA, UK, and European Union countries purchased most of the new issue and participated in the Eurobond exchange transaction: their shares were 48%, 38%, and 13%, respectively.
The investor base of the whole transaction mainly consists of asset management funds (81%), hedge funds (13%), banks (4%), and pension and insurance funds (2%).
Is there a "window of opportunities" open for non-sovereign Ukrainian issuers now?
2020 is the year of the extremely volatile capital market. It is particularly difficult to find a window of opportunities for the issuers from emerging markets since the duration of such a period can be measured in days rather than weeks. For corporate issuers, this time window is even shorter, as one needs to account for the availability of latest financial statements.
What was the bond volume purchased by the Ukrainian investors?
Ukraine-resident investors purchased less than 1% of the new issue of Ukrainian sovereign Eurobonds; however, we have no information regarding Ukrainian investors who may have purchased the bonds in other jurisdictions.
Issue — Ukraine, 7.253% 15mar2033, USD
Country of riskUkraine
Redemption (put/call option)
М/S&P/F— / — / —
Company — Ukraine