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Ukrainian Eurobonds weekly comment

February 09, 2016 | Cbonds

Dmitry Churin, Head of Research, Eavex Capital:

Ukrainian sovereign Eurobonds ended last week notably lower after the resignation of Economics Minister Aivaras Abromavicius created a slew of native publicity and revealed growing dysfunction in the government. The resignation was seen as a signal that if political infighting is not resolved, it could lead to a snap parliamentary election, which might further impede the implementation of pro-European reforms. Meanwhile, Prime Minister Arseniy Yatseniuk said at a Cabinet meeting on Thursday that the government remains united and committed to overhauling the economy. The key question is whether the Prime Minister was convincing enough to persuade the IMF not to delay a USD 1.7bn loan tranche expected by the end of this month. Investors are becoming concerned that Ukraine’s slow pace of recovery could turn it back in recession. The country’s benchmark 10-year Eurobonds lost 3.8% over the week to close at 87.0/.88.0 (9.7%/9.6%), and the yield on the shortest outstanding bonds, Ukraine-19s, climbed above the 10% level, with the issue finishing down 2.1% at 92.0/93.0 (10.5%/10.1%). The so-called VRIs (value recovery instrument linked to future GDP performance) dropped by 2.0% to 35.5/37.5 cents on the dollar.

In corporate debt papers, Avangard-18s had a very bad week, tumbling 20% to close with a wide bid/ask spread at 35.0/38.0 (58%/54%). These bonds had a maturity date in October 2015 that was extended by 3 years. Ferrexpo-19s slipped 1.3% to 53.4/56.2 (36.2%/34.0%). The Eurobonds of Ukraine’s state-owned railway operator UkrZaliznytsa (RailUA-18s) fell 0.5% to 83.9/84.3 (18.4%/18.2%).

Quasi-sovereign OschadBank-25s declined by 1.5% to 84.0/85.3 (12.6%/12.3%), and PrivatBank-21s lost 0.5% to 60.8/63.5 (25.3%/23.9%), ignoring the bank’s claim that it managed to post a moderate net profit for FY15.

Issue: Ukrainian Railway, 9.5% 21may2018, USD

StatusDefaultCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
early redeemedYesUkraine05/21/2018500,000,000 USD-/NR/Withdrawn

Company: Ukrzaliznitsya

Full company nameThe State Administration of the Ukrainian railway Ukrzaliznitsya
Country of riskUkraine
Country of registrationUkraine
IndustryTransportation

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