Ukraine’s state road service is due to receive a loan of $465 million
Ukraine’s state road service Ukravtodor is due to receive a loan of $465 million, its second large-scale loan this year, to finance desperately needed and long overdue upgrades of the country’s road infrastructure.
Morgan Stanley, one of the world’s largest investment banks, is providing the loan. Ukravtodor would not disclose the terms of the loan.
Ukraine’s cabinet is backing Ukravtodor on the loan with state guarantees, according to an Aug. 22 instruction issued by the government.
The state company received its first large-scale loan of $615 million earlier this year to develop Ukraine’s main roads from the European Investment Bank (EIB) for a 20-year term at LIBOR+ 0.55%. Ukravtodor has already signed an agreement with EIB for the first tranche of the loan totaling $273 million.
Ukraine, Eastern Europe’s largest country by territory, recently celebrated 16 years of independence from the Soviet Union, from which it inherited its now largely dilapidated road and transport infrastructure.
With its population of around 46 million, Ukraine has drawn increasingly closer to the West over the period, and in its turn attracting more tourists every year. In less than five years, Ukraine is due to host the Euro-2012 soccer championships along with its EU neighbor Poland. The state had in the past been slow investing money into the country’s roads and transport infrastructure earlier, but has shifted these efforts into higher gear this year raising record loans from western lenders for overhauls.
According to Ukravtodor spokesperson Iryna Chukhlibova, the Morgan Stanley loan would be spent on repairing general-use roads and buying the equipment needed to make repairs. She added that the Morgan Stanley was chosen in a tender, in which around 10 banks competed.
According to Ukravtodor, its expenses to service its debts totaled $129 million in 2006, double debt-servicing expenditures from the year before. This year, these expenses can reach $193 million, according to the state company.
Meanwhile, just two weeks ago Ukrzaliznytsya, Ukraine’s state railway monopoly, received a record loan of more than $550 million from Barclays Capital Bank. That loan will be spent on badly needed upgrades and infrastructure development for the country’s aging Soviet-built railways, which have been blamed for a series of accidents and headaches for businesses reliant on Ukraine’s transport infrastructure.
The European Bank for Reconstruction and Development (EBRD) has also provided Ukravtodor and Ukrzaliznytsya with large loans.
From 2000 to 2006, the EBRD provided three loans to Ukravtodor for a total of $512 million.
The Bank has also provided a $120 million loan to Ukrzalizntsya and a loan of $111 million to the State Railway Transport Administration of Ukraine.
