Azernews.Az

By Bloomberg

The bonds of State Export-Import Bank of Ukraine surged past 70 cents on the dollar for the first time since January as the nation’s third-biggest bank offered better terms in a restructuring proposal than investors expected.

The trade bank’s $750 million of notes due April 27 climbed 9.01 cents to 73.84 cents on the dollar at 12:05 p.m. in Kiev, the highest level since Jan. 20. It plans to hold a webcast with investors at 10 a.m. London time on Tuesday.

Ukraine’s third-largest bank said on Monday it will seek to extend the maturity of the 2015 bond by seven years if creditors vote to push back the redemption date by three months at a meeting next week. The bank failed to get enough attendance at a meeting on April 13 for the extension. The quorum threshold for the vote has been lowered to one third of investors. Of those who vote, it needs 75 percent in favor to pass the motion.

“The terms of the restructuring have been made quite attractive,” Dmitri Petrov, an analyst at Nomura Holdings Inc. in London, said by e-mail. “Somebody must be expecting/suspecting a successful maturity-extension vote.”

The coupon on the notes will be increased to 9.625 percent from 8.375 percent and 50 percent of the principal amount of the notes in April 2019 and will redeem the rest in semi-annual installments from October that year, Ukreximbank said on Monday.

The bank will probably default if creditors reject the extension at a meeting on April 27, it said last week.

Special Treatment

Ukreximbank is one of three state-owned companies, including AT Oschadbank and Ukrainian Railways, whose creditors will receive preferential treatment relative to the sovereign in the nation’s debt restructuring because they don’t have government guarantees. For that reason, their bonds will only be used to meet the first of three targets mandated by the International Monetary Fund as part of its bailout.

For the first, Ukraine needs to reduce financing costs by $15.3 billion over the next four years. The second is to bring Ukraine’s public and publicly guaranteed debt-to-gross domestic product ratio to below 71 percent by 2020, while the third seeks to keep the budget’s gross financing needs at an average of 10 percent of GDP in the 2019-to-2025 period.

“The move is related to the proposed extension offer -- final maturity of 7 years and amortizing,” Richard Segal, the head of emerging-market credit strategy at Jefferies Group LLC in London, said by e-mail on Tuesday. That “compared with initial expectations of 10 years, plus hike in the coupon, when unchanged was the consensus expectation.”