Ukraine raises USD 3 bln in debt, needs to repay USD 0.75 bln by weekend

Макроэкономика 24.12.2013 The Ukrainian government listed a USD 3 bln, two-year Eurobond with a coupon rate of 5% and a semi-annual repayment, news agencies reported on Dec. 23. Russian Finance Minister Anton Siluanov announced the same day that the Russian government, the sole buyer of the bonds, would close the deal on Dec. 24. Meanwhile, the Interfax-Ukrayina news agency reported that Ukraine will have to repay USD 750 mln to Russia by Dec. 27, 2013. The USD 750 mln syndicated loan from Russian Sberbank was taken in September 2013 without its tenure being disclosed. An August Cabinet resolution said it was for “up to two years.” Yet according to the prospectus of newly issued Ukrainian Eurobonds, as cited by Interfax, the loan matured on Dec. 12 yet the Ukrainian government was able to prolong it till Dec. 27 by agreeing to interest rates raised to 9.5% from 6.5%. Alexander Paraschiy: It seems like the Ukrainian side will spend its newly acquired dollars in one week’s time. On top of USD 750 mln loan repayment to Russia in three days, the government will have to settle its outstanding payables to Gazprom for imported gas. Based on what’s been revealed by Naftogaz (NAFTO) CEO Yevhen Bakulin, the state gas production and transit monopoly will have to pay USD 765 mln to Gazprom (for gas imported in August) by the year end. Most likely though, Naftogaz will pay more as its total debt to Gazprom was USD 2.05 bln as of the beginning of December, and the debt could have risen by another USD 0.9 bln during this month. That said, we see that by placing USD 3 bln notes, the Ukrainian government is only partially solving its needs to settle its very short-term obligations with Russian entities. By providing this loan, the Russian Federation is both drawing Ukraine into its orbit, as well as ensuring that Ukraine will settle its obligations to Russian state holdings Sberbank and Gazprom.