Ukraine attracts USD 750 mln syndicated loan

Макроэкономика 19.09.2013 Sberbank CIB, the corporate and investment banking division of Sberbank of Russia (SBER RU), reported on its website on September 18 that it participated in arranging a USD 750 mln loan to Ukraine’s government. Sberbank of Russia was named as an entity that provided the loan, and the release stressed it was the first time Russia’s leading bank cooperated with the Ukrainian government. No other syndicate participants and no other deal parameters were disclosed. Earlier, the Ukrainian mass media hinted on the deal’s details, citing a Cabinet of Ministers resolution. Based on these reporters, the loan might have been taken for two years with quarterly interest payments at an annual rate that does not exceed 6.5%, with a commission fee at no more than 0.5%. Alexander Paraschiy: The possibility of attracting the loan has been discussed in the Ukrainian media since late August, after the Cabinet approved its desired conditions. Nonetheless, it’s a positive surprise given that business relations between Ukraine and Russia spoiled in mid-August, as soon as Ukrainian President Viktor Yanukovych explicitly declared his intention to sign EU Association Agreement. The successful deal shows that Ukraine’s cooperation with Russian state entities is still going smoothly, and hints it will continue as such regardless of geopolitics. While the new external financing will serve to slightly increase Ukraine’s foreign currency reserves in September, the loan won’t be enough to keep reserves flat till the year end. In particular, Ukraine is scheduled to repay about USD 1.6 bln to IMF in October-November, and Naftogaz of Ukraine is scheduled to repay USD 0.4 bln to VTB Capital in early October. On top of that, Ukraine will intensify gas imports in September-October, which will affect the C/A deficit, and there is a high risk that the Ukrainian population will intensify its purchases of foreign currency from banks during these autumn months, as tradition. We believe the government will need to attract an additional USD 2.0 bln in foreign debt to ensure that NBU reserves will not fall below USD 20 bln by the end of 2013.