Russia may demand early repayment of USD 3 bln Ukraine bond

Обзор облигаций 29.09.2014 Russian Finance Minister Anton Siluanov does not rule out that his government will demand early repayment of a USD 3 bln, two-year debt given to the Ukrainian government in December 2013 in the form of a Eurobond purchase. This Eurobond contains a clause allowing the holder to demand repayment of the loan in case Ukraine’s state debt-to-GDP ratio exceeds 60%. Siluanov suggested that this might have happened already in 3Q14, Russian 1Prime.ru reported on Sept. 26. He expects the official statistics on Ukraine’s 3Q14 GDP in November, which may open an option for the Russian side to demand repayment. “This will be our political decision” Siluanov commented on whether Russia will use the option. Alexander Paraschiy: Based on our own preliminary GDP estimate, the ratio of Ukraine’s debt-to-GDP reached 63.3% as of end-August. The easiest way for the Ukraine government to not grant an opportunity for Russia to demand any repayment is to stop making its GDP figures public. The official reporting of Ukraine’s 3Q GDP is preliminarily scheduled for Dec. 10 (not for November, as Siluanov expects), which might become the trigger day for Russia. In the worst case, it could mean that Ukraine will have to repay this debt in late December 2014-early January 2015, or about 11-12 months before its ultimate maturity. For this reason, the threat that Russia will demand early repayment is not very critical for Ukraine. The repayment should be made by December 2015 regardless, that is, if Ukraine’s government chooses to obey its commitments to the government of the aggressor-state.