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Eavex Capital Research: Ukrainian Eurobonds weekly comment

February 26, 2018 | Cbonds

Ukraine’s sovereign Eurobonds ended lower last week despite a clear demand for high yield emerging market debt. Belarus managed to place USD 600mn in 12-year Eurobonds at a rate of just 6.2%, with demand for the issue far over-subscribed at USD 2.8bn. Belarus and Ukraine have the same B-minus credit rating from Fitch. As a confirmation of the risk-tolerant environment, a survey prepared by JPMorgan Chase said that a third of institutional investors are planning to allocate additional capital to emerging-market strategies this year.

In Ukraine-related news, President Poroshenko said he will continue to insist on the introduction of a peacekeeping mission in the Donbass, which has now been occupied by pro-Russian separatists for nearly 4 years. Such a mission remains unlikely since Russia is refusing to allow any peacekeepers inside separatist-controlled territory.

The longest outstanding Ukrainian Eurobonds, Ukraine-32s, declined by 1.1% to 96.5/96.9 (7.8%/7.7%), while medium-term Ukraine-23s shed 1.2% to 104.6/105.2 (6.7%/6.6%). The generally more volatile the VRI derivatives (linked to Ukraine’s future GDP growth with expiration in 2040) dropped by 1.3% to 66.0/67.0 cents on the dollar.

Metinvest-21s showed a similar performance, decreasing by 1.0% to 101.2/101.9, and DTEK-24s corrected by 0.6% to 105.6/106.3 (9.5%/9.4%). Kernel-22s inched down 0.2% to 109.4/109.6 (6.0%/5.9%) ahead of the company’s financial report due for release on Feb 28.

Banking sector debt papers also followed the trend in sovereigns. OschadBank-25s slipped 1.4% to 107.5/108.3 (8.2%/8.1%). Although yields for the sector grew, UkrEximBank kicked off a road show for its planned new 5-year Eurobond issue. The amount of the placement has not been disclosed, but it is being reported that new bonds will be formally denominated in hryvnia with both the coupon and the redemption linked to the official UAH/USD exchange rate.

Company: Ukraine

Full company nameUkraine
Country of riskUkraine

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