Bonds of State Export-Import Bank of Ukraine fell for a second day before the results of a vote by the lender’s creditors on whether to grant a three-month maturity extension.
Ukreximbank’s $750 million of notes due on April 27 fell less than 0.1 cent to 61.91 to the dollar by 4:55 p.m. in Kiev. The debt rallied 11.5 cents last week, crossing 60 cents to the dollar as investors became more optimistic that they will get better terms than holders of the sovereign while the government seeks to change terms on its external debt to save $15.3 billion.
Investor expectations were colored in part by the Finance Ministry saying April 4 it planned to treat the lender and AT Oschadbank differently in the wider debt overhaul. A vote on the proposal to push back the debt maturity to July 27 ended on Thursday, and bondholders are scheduled to meet on Monday at the offices of White & Case LLP in London, which is advising Ukraine on its broader restructuring.
“I assume they will vote to approve,” Timothy Ash, the chief emerging-markets economist at Standard Bank Group Ltd., said by e-mail. “Investors are saying they expected to get a few points in sweetener to sign up. At the moment, the bondholders still have the chance of being treated better than the sovereign. If they don’t agree they risk not being paid, and then rolled into a harsher restructuring.”
While Bank of America Corp. said last week creditors should vote in favor of the proposal, Landesbank Berlin Investment GmbH and Independent Credit Research LLC said rejecting the maturity extension may be enough to force Ukreximbank to pay the notes on time.
Independent Credit, which produces research on distressed debt, advised clients last week to buy Ukreximbank’s notes.
The price of Ukreximbank’s bonds after last week’s rally is “encouraging, but of course it still trades heavily discounted, so the market expects haircuts eventually,” Richard Segal, the head of emerging-market credit strategy at Jefferies Group LLC in London, said by e-mail. “Investors will most likely vote in favor of extending as it is in their interests, but you can never rule out opportunistic holdouts.”
Ukraine, whose largest creditors are Franklin Templeton and Russia, is seeking to restructure 29 bonds and enterprise loans by the end of May to qualify for the next tranche of a $17.5 billion International Monetary Fund loan. The country needs aid to avoid draining more of its reserves after a yearlong conflict in the country’s east drove them to a record-low $5.6 billion in February.