Page 51 - bne IntelliNews Country Report: Ukraine Dec17

peak at 71.5% of GDP (83.3% including guarantees) this year, and to decline, for the first time since 2007, to 67.3% in 2018, still above the 58.5% 'B' median. Debt dynamics remain subject to currency risks (68% FX denominated).
The financial system is stable but weak. It continues to represent a contingent liability for the sovereign due to the large state presence (56% of total assets after the nationalisation of Privatbank). Total bank recapitalisation and clean-up costs between 2013 and 2017 are estimated at UAH401 billion (14.3% of 2017 GDP). Loan portfolio quality is weak, as NPLs account for 57% of total loans. NPLs net of provisions equalled 13% of total loans in H117. Deposit and credit dollarisation have declined to 42% (from 46.9% end-2016) and 44% (from 49.3%), respectively.
Despite significant progress in macro stabilisation, energy, pensions and the fight against corruption, political risks for the reform agenda stem from powerful vested interests, fragmented political forces, rising populist voices and the slow recovery after a deep crisis. Presidential and parliamentary elections are scheduled for 2019, increasing the political cost of reforms.
The unresolved conflict in eastern Ukraine remains a risk for overall macroeconomic performance and stability. There are constant clashes along the contact line, but a material escalation of hostilities is not part of our base case scenario. The USD3 billion outstanding debt dispute with Russia is in the English Court of Appeals. Fitch does not expect the resolution of the debt dispute to impair Ukraine's capacity to access external financing and meet external debt service.
8.5 Fixed income
8.5.1 Fixed income - bond news
Ukraine's state-owned post operator Ukrposhta says it will issue local bonds for UAH600mn ($22.5mn), according to a note published by the National Commission for Securities and the Stock Market. The securities will be issued with a face value of UAH100,000 in the following amount: 1,500 of Series A, 2,000 of Series B and 2,500 of Series C. The Series A bonds will mature on November 16, 2020, Series B - on May 16, 2022 and Series C - on November 13, 2023, Interfax news agency reported on November 7. The securities will be placed on the Perspectiva stock exchange in the period from November 21, 2017 through November 20, 2018.
Metinvest paid interest on its Eurobonds accrued between August 18-November 17 , redeemed PIK notes, paid catch-up interest, and settled some of the principal. After making an early payment of $13.0m on Sep. 18, with $6.7m going towards PIYC and $6.3m towards PIK redemptions, the group paid a cash-pay interest of $8.5m, and cash sweep of $48.2m, including $13.3m of PIYC interest for the second interest period, $20.1m of accumulated PIK interest, $4.6m of catch-up fees and $10.1m of the principal, bringing the outstanding principal to $1,187m with a pool factor of 0.9916. Unrestricted cash balances over the period stood at $272m. The windfall from high steel
51 UKRAINE Country Report December 2017 www.intellinews.com