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ArtCapital: No FX Bond Placements in September

September 04, 2012 | Cbonds

ArtCapital: UKRAINE FIXED INCOME Weekly Review - September 4, 2012

Eurobonds market 

Ukrainian Eurobonds traded mixed last week, most of the corporate Eurobonds having recuperated from a slide two weeks ago. The yield on the short-term Eurobond, Ukraine-13, climbed 0.15pp to 7.2%. The yields on the longest Eurobonds, Ukraine-20 and Ukraine-21, retreated 0.23pp (to 8.8%) and 0.29pp (to 8.8%), respectively. Other Sovereign Eurobonds quotations changed less materially. In what was last week’s major event, Ukraine’s government approved the terms of a new $1bn Eurobond issue to refinance a VTB loan. The new issue carries 7.95% (semi-annual) coupon payments and matures June 4, 2014. Head of VTB, Andrey Kostin, had previously pledged the bank would sell the new Ukrainian Eurobonds on the secondary market, potentially causing some downward pressure on Ukrainian Eurobond prices in the near term. MHP and Avangard posted their 1H2012 financial results last week. Both companies exceeded analyst expectations. MHP reported 24% YoY growth in revenues to $654mn. EBITDA and net income doubled YoY to $321mn and $170mn, respectively. Avangard’s report showed a 27% YoY increase in sales to $284mn, 34% YoY EBITDA growth to $122mn and a net income of $98mn (+46% YoY). All of the financial statements materially outperformed analyst expectations. Thus, the MHP’15 yield fell 0.12pp WoW to 10.5%; the Avangard’15 yield did not change due to the bond’s illiquidity on the secondary market (quotations had stood unchanged for over a month). FUIB’14, Metinvest’15 and DTEK’15 outperformed the market, their yields going down 0.78pp (to 13.1%), 0.22pp (to 10.1%) and 0.23pp (to 10.1%) respectively. This week will be full of events: the ECB will meet September 6 in Frankfurt to provide new details of a government-bond-buying program, and Greece's finance minister will reveal new budget cuts to European bailout inspectors Sunday. 

Local bond market 

Tuesday’s regular auction failed last week, as only hryvnia-based OVDP were offered at a non-market price (yields ranging in the usual 14-14.3%). However, the government sold UAH 200mn of index-based OVDP (9.3% yield) and $286mn of dollar-based OVDP (9% yield) in a snap auction. Both placements were market-driven. In September, the MoF plans to hold bond auctions each Tuesday, offering 5- and 7-year OVDP, with no FX OVDP placements. The index-based OVDP, however, are to be sold September 11. 

Due to the banking system’s low liquidity and hryvnia devaluation expectations, the local bonds’ yield curve went up more than 5pp at the short-end of the curve and about 2pp at the long end. At the same time, the hryvnia remained flat against the dollar on the interbank forex market Friday (8.08 UAH/$). 

Ukrainian govt confirms terms of eurobond issue for refinancing VTB loan 
Ukraine, in the context of partially refinancing its debt to VTB will provide the bank with $1 billion in eurobonds with maturity on June 4, 2014 and a rate of 7.95% per annum. The Ukrainian Cabinet of Ministers confirmed the corresponding terms of the eurobond issue in a resolution #795 dated August 27, which has been published on the government's Web site. According to these terms, interest income on the bonds will be paid out semiannually - on December 4 and June 4. 

Stanislav Zelenetsky: At the beginning of the summer, the government for the first time mentioned about issuing of the $1 bn new Eurobonds to partially refinancing its $2 bn debt to VTB. At that time ,the head of VTB, Andrey Kostin, pledged, that they were going to sell the new Ukrainian Eurobonds at the secondary market. We believe VTB’s intention is still valid for now. Given the new issue is on the Ukraine sovereign curve, VTB has good chances to sell the bonds at the nominal price, however, it may lead to some downward pressure on quotations of Ukrainian Eurobonds.

Company: Art Capital

Full company namePJSC "Art Capital Investment Company"
Country of riskUkraine
IndustryFinancial institutions

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