The Ukrainian government will hold a $1 billion U.S.-backed bond sale before a presidential election scheduled for May 25, Finance Minister Oleksandr Shlapak said.
The five-year bonds with U.S. guarantees will be sold at a yield of as much as 2.9 percent, according to a government notice published on its website today, less than the 5 percent rate offered by Russia in a bailout deal in December.
“Ukraine will sell the bonds in the near future,” Shlapak said in an interview in Brussels late yesterday. “A lead manager is already working on it,” he said. “I’m sure we’ll get the U.S.-backed money before the election.”
Ukraine is lining up international funding to bolster its economy as it fights what acting Defense Minister Mykhaylo Koval called an “undeclared war with Russia.” Earlier this month, Ukraine received $3.2 billion from the International Monetary Fund, the first payment of $17 billion in aid loans.
Shlapak also said Ukraine will begin to receive 1.61 billion euros ($2.2 billion) of European Union aid before May 25 after an agreement was signed with the European Commission yesterday in Brussels.
The yield on Ukraine’s 2023 dollar bond was unchanged at 10.35 percent at 12:25 p.m. in Kiev. The rate on the security jumped to 11.42 percent in February when Russia suspended the bailout for its neighbor. Standard & Poor’s rates the sovereign at CCC, eight levels below investment grade.
The U.S. Agency for International Development signed a $1 billion sovereign loan guarantee with Ukraine last month to help it “access capital at reasonable rates and manage the transition to a prosperous democracy,” the agency’s associate administrator, Mark Feierstein, said at the time. “The guarantee assures investors of full repayment of principal and interest.”
Ukraine needs almost $8 billion this year to meet debt payments, including interest, data compiled by Bloomberg show.
The Brussels-based commission, the EU’s executive arm, and Ukraine yesterday signed a memorandum of understanding on the loan program that must be approved by the Ukrainian parliament, according to a joint statement.
“We expect to receive a large part of this money in May and early June,” Shlapak said.
The finance minister said 610 million euros of the EU aid had been approved previously by Ukraine’s parliament. The additional 1 billion euros requires separate ratification.
“If we get it done before the election, great; if not, then right after the election we’ll get the first 500 million euros,” he said.
“It wasn’t a complicated process” to ratify the initial 610 million euros, he said. “And we won’t find such inexpensive, long-term funds on the market. So I have no doubt that we’ll quickly ratify the 1 billion as well,” Shlapak said.
Shlapak said that before the election, Ukraine would receive 100 million euros of the 610 million euros already approved. That sum will be paid out in three tranches of 100 million, 250 million and 260 million, he said.
To contact the editors responsible for this story: Balazs Penz at email@example.com Jones Hayden, Wojciech Moskwa