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Concorde Capital Research: Ukraine calls USD 725 mln in Eurobonds issued in August

November 05, 2018 | Cbonds

Ukraine’s MinFin has repaid a discount bond of USD 725 mln par value issued in August at a call price of 98.551% of par, the funclub.net Ukrainian news site reported on Nov. 3. The USD 725 mln in discount notes were privately placed on Aug. 27 at 95.551% of par. The notes were callable at 98.551% by Nov. 28 and at par thereafter. Their final maturity was Feb. 28, 2019.

Recall, Ukraine attracted USD 2 bln from the placement of 5-year and 10-year Eurobonds in late October, at rates of 9.0% and 9.75%, respectively.

Alexander Paraschiy: There was little logic in such a call for Ukraine’s Finance Ministry, in our view. By not calling the bond at 98.551% on Nov. 2 (or Nov. 1), MinFin would have had to repay it at par on Feb. 28, thus having effectively paid about 4.5% in annualized interest between these two dates. This is definitely much less than MinFin will have to pay for other USD debt that it will have to attract (e.g. local Eurobonds are being regularly placed by MinFin at the 7.0%-7.5% rate).

There is no doubt Ukraine will further place local bonds in the near weeks at rates much higher than 4.5%, as it will have to refinance other local Eurobonds that will mature soon (USD 265 mln in November-December, USD 920 mln in January-February). Therefore, it looks like MinFin’s exercising its call option was a condition for its creditor (the holder of discount notes) to invest in new Eurobonds that were placed in October. Meanwhile, holders of the discount notes have earned about 17.1% on their investment since Aug. 27.

Issue: Ukraine, 0% 28feb2019, USD (184D, ECP)

StatusCountry of riskRedemption (offer)VolumeIssue Rating (M/S&P/F)
early redeemedUkraine02/28/2019725,000,000 USD -/-/-

Company: Ukraine

Full company nameUkraine
Country of riskUkraine

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