Ukraine to Repay Debts, May Delay Eurobond, Pakhatyuk Says
February 16, 2012, 12:29 PM EST
By Daryna Krasnolutska
(Updates with Pakhatyuk comments starting in second paragraph.)
Feb. 16 (Bloomberg) — Ukraine pledged to fulfill its debt obligations and said it will only go ahead with a Eurobond sale next month if market conditions are “favorable.”
The former Soviet state will service and repay all of its debt, Halyna Pakhachuk, head of the Finance Ministry’s financial policy and government-debt management department, told reporters today in the capital, Kyiv.
“The Finance Ministry will borrow abroad only if the situation is favorable,” she said. “I consider the situation unfavorable should interest rates exceed 9 percent.”
Ukraine wants to raise 13.67 billion hryvnia ($1.7 billion) abroad this quarter, 12.15 billion of which would come in March, the ministry said Feb. 9. It picked JP Morgan Chase Co., Morgan Stanley and Russian investment banks VTB Capital and Troika Dialog, which is controlled by OAO Sberbank, to lead manage a potential Eurobond sale, according to a Feb. 3 statement, without providing further details.
Ukraine’s government bonds due to 2016 fell, pushing yields up to 9.879 percent as of 4:27 p.m. in Kyiv compared with 9.867 yesterday, data compiled by Bloomberg show. Similar-duration Russian debt yields 7.39 percent.
“We want to increase domestic borrowing,” Pakhachuk said, adding that the ministry will introduce weekly dollar- denominated, domestic-bond auctions for individuals from the second quarter. “It’s better to pay a 9 percent interest rate to our citizens than to transfer abroad.”
All banks should be able to offer dollar-denominated government bonds to individuals, Pakhachuk said. The ministry and the central bank are working on simplifying the purchase process, she said.
Ukraine is seeking to raise 17.2 billion hryvnia domestically by the end of March, according to the ministry’s plan.
–With assistance from Kateryna Choursina in Kyiv. Editors: Andrew Langley, Hellmuth Tromm
To contact the reporter on this story: Daryna Krasnolutska in Kyiv at dkrasnolutsk@bloomberg.net;
To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net