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Empire State Capital Partners Research: Ukrainian Railway will make a placement of UAH 2 bn worth local currency bonds

April 26, 2018 | Cbonds

The Cabinet of Ministers of Ukraine allowed Ukrainian Railway to make a placement of local currency bonds with UAH 2,000 mn (approx. USD 76.6 mn) of the aggregate principal amount.
The placement is divided into 4 different series: A, B, C, and D, with the maturity date on May 26, 2022. Each series has its own specific coupon payment terms. Series A has a 19.0% coupon rate, which will be paid during the first year (until May 30, 2019), Series B and C have an 18.75% coupon rate, which will be paid during the first year and a half (until November 28, 2019) and, finally, Series D bonds has an 18.5% coupon rate, which will be paid during the first two years (until May 28, 2020). For the next periods, the coupon rate will be determined by Ukrainian Railway’s board of directors, but should not be less than the NBU key policy rate plus 0.5% and should not exceed a coupon rate of 21.0%. All coupon payments will be made quarterly. The proceeds will be spent on current assets and debt refinancing.

Our view:
Placement of the local currency bonds will have a positive impact not only on the Company's operations but also on its debt portfolio, by diversifying it and reducing the foreign currency risks. We think that the floating coupon rates were applied in order to optimize the financial costs. The ability to change the coupon rate will not only preserve the investment attractiveness of the bonds, in comparison with the existing issues of riskfree government bonds (OVDPs), but also reduce interest payments, in case of the reduction of the key rate of the National Bank of Ukraine (NBU) and, as a result, decrease in the OVDPs’ yields.

Company: Ukrainian Railway

Full company nameUkrainian Railway
Country of riskUkraine
Country of registrationUkraine
IndustryTransportation

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