Page 55 - UKRRptNov18

agency also outlined structural and institutional constraints coupled with geopolitical and political risks. Among credit positive factors Fitch mentioned improving policy credibility and macroeconomic stability, declining government debt and a track record of bilateral and multilateral support. We see election risk in 2019 as key to the future policy development while the short-term nature of IMF SBA will require Ukraine to seek a new deal with IMF next year after the elections.
8.5 Fixed income
8.5.1 Fixed income - bond news
MHP bondholders approve changes to 2020 bond covenants. The holders of the 2020 notes of MHP (MHPC LI, MHPSA), Ukraine’s leading poultry producer, approved proposed amendments to the bond’s covenants in time for an October 12 deadline, the company reported on October 15. This became possible after the company increased its consent fee from an initial 50 bps to 100 bps on October 5. The consent settlement date was set at October 17. This is the second time MHP has changed covenants to its notes due in 2020 and the second time it has had to raise the consent fee to get the approval done (in February 2016, it increased the consent fee to 125 bps from the initial 50 bps.)
Kyiv plans to return to the municipal Eurobond market next year, Mayor Vitali Klitschko told the American Chamber of Commerce on Friday. During his four-year tenure as Mayor, Klitschko says he cut the city’s $1bn debt in half and doubled the city’s budget, to $1bn. Two bond ratings agencies, S & P and Fitch, give the capital B-Stable ratings. In 2018, he said he increased the city budget by 30%, partly by ‘pulling money out of the shadows.’ T
Ukraine’s Finance Ministry raised $41.3mn and UAH7.1mn (a total of UAH1.2bn in the equivalent) at an October 16 auction after raising the equivalent of UAH11.0bn last week. The government satisfied all six bids for $-denominated bonds maturing in January’20, two bids for May’20 bonds and all seven bids for October’20 at a unified interest rate of 7.5%. Meanwhile, June’19 local Eurobonds were sold to eight out of ten bidders at 7.0%. Around 60% of $auction receipts, or $25.3mn, came from the sale of October’20 bonds. Receipts from the sale of June’19 local Eurobonds amounted to $8.3mn. The rest of $receipts – $7.6mn and $0.1mn – came from January’20 and May’20 bonds, respectively. UAH7.1mn in auction receipts came from the sale of 3M UAH-denominated bonds, satisfying six out of eight bids at 19.0%. The government refused to satisfy two bids for 2Y UAH-denominated bonds at 18.00% and 17.75%, apparently finding those interest rates too high. In buying up local Eurobonds and largely ignoring UAHdebt, bond market participants eagerly responded to the government's need for foreign currency, as reflected by the high interest rates it was willing to accept. These needs are especially high currently as a $501mn redemption of local Eurobonds is scheduled for today, and another €208mn in local Eurobonds is due next week. Since the beginning of October, MinFin has attracted $411mn and €30mn from local bond placements. Next week, it will offer 9M and 12M bonds denominated in euro, according to its schedule. Apparently, its goal is to fully refinance these October repayments, and it’s likely that MinFin more or less will fulfill its plan.
55 UKRAINE Country Report November 2018 www.intellinews.com