Monday, 12 July 2010

Ukraine Cabinet to Help Kiev City to Pay Debt in 2010

Ukraine’s Finance Ministry said it will help the capital, Kiev, repay its domestic and foreign debt this year, First Deputy Minister Vadym Kopylov.

“Ukraine’s Cabinet and the Kiev administration will further take steps to ensure Kiev city’s budget has enough funds to hold an efficient debt policy,” Kopylov said today in a statement, e-mailed by the ministry press office today. Kiev’s 2011 dollar bonds rose to 96 cents on the dollar, the highest since July 2, pushing the yield down to 13.016 percent, Bloomberg data shows.

Kiev is likely to restructure principal of its $200 million of notes due 2011 and $250 million of bonds due 2012, while continuing to meet interest payments, said an unidentified official in the city’s administration on July 5.

“Recent contradictory statements by city of Kiev officials on a possible restructuring are linked to a de-facto takeover of the city government by central authorities,” said Kaan Nazli, director at New York-based Medley Global Advisors LLC in an e- mailed note today. They “are likely to result in a restructuring offer later this year.”

Nazli said that “if the restructuring does take place, it will weigh on the sentiment of sovereign bonds as well as other Ukrainian corporates and quasi-sovereigns.”

The restructuring “would trigger concern that more restructuring would be on the way, despite the recent improvement in sovereign credit ratings and the International Monetary Fund backstop,” he said.

The IMF said on July 3 it agreed a $14.9 billion loan for Ukraine to replace an existing program and the government this month plans to sell its first Eurobonds since 2007 to help cover its deficit.