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Ukraine Plans to Complete Eurobond Sale Mid-July

Ukraine’s government plans to complete its first Eurobond sale since 2007 by the middle of next month as the country struggles to renew its International Monetary Fund bailout program, Prime Minister Mykola Azarov said.

“We are currently placing Eurobonds and this is a lengthy procedure,” Azarov said in an interview late yesterday in Luxembourg. “We are negotiating and communicating this with several European and American banks, including Morgan Stanley and Russian bank VTB.”

The government selected JPMorgan Chase & Co., Morgan Stanley and VTB Capital to lead the former Soviet republic’s planned Eurobond sale, the Finance Ministry said on May 17. The country wants to sell $1.3 billion in Eurobonds this year as part of a $4.3 billion package of borrowing that includes international donors to cover the budget deficit.

“The placement is happening within the scope of the mandate we’ve been given by the parliament,” Azarov said. “As regards the amount, it’s inexpedient now to talk about this and we need to fully negotiate all the details with our counterparts.”

Ukraine has also negotiated a $2 billion loan from VTB Group, Russian second-largest bank, Azarov said. The money “will be then reimbursed after the full and complete placement of the Eurobonds,” he said without giving any details.

Ukraine’s state budget received a 15.8 billion hryvnia ($2 billion) loan from abroad as of June 14, the state treasury said in a statement on its Web site without providing any details.

IMF Loan

The government is trying to negotiate a second loan with the International Monetary Fund that may be between $12 billion and $20 billion. The IMF has yet to decide on the size of the loan, which would replace an existing standby agreement of $16.4 billion that has been frozen since November as the country failed to cut budget spending.

An IMF team is expected in Kiev on June 21 “and I plan that we can wind up negotiations by the end of June and arrive at a new program,” Azarov said. The first disbursement “will depend on the IMF board of directors. We would definitely welcome the arrival of the new tranche in July and August.”

The country initially sought to get the installment in June though talks are dragging on because the country still needs to persuade the Washington-based lender about its budgetary sources, Deputy Prime Minister Serhiy Tigipko said last month. The deficit is planned at 5.3 percent of gross domestic product.

Ukraine’s credit ratings were raised at Standard & Poor’s on May 17 to ‘B/B’, from ‘B-/C’. The yield on Ukraine’s 6.75 percent bond due in 2017 fell to 7.99 percent from 11.3 percent in January, according to Bloomberg data. Credit-default swaps on five-year debt have halved this year.

Ukraine’s economy, which slumped 15.1 percent in 2009, grew 5 percent in the first five months of this year, Azarov said. Output expanded an average 7.5 percent between 2000 and 2007.

“In two years’ time, we plan to reach the pre-crisis development in our economic potential,” said Azarov.

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