Ukraine raked in $3 billion from a 15-year eurobond issuance on Sept. 18, the Finance Ministry announced on Sept. 19.
The issuance – which comes with a yield of 7.375 percent – will expire in 2032, and marks the country’s first issuance since it restructured its debt in 2015.
“It exceeded expectations,” said Dmitry Churin, an analyst at Eavex Capital, who said that the government had initially expected $2 billion to be generated from the sale. “It’s a good market, and investors are hungry for high yield instruments.”
President Petro Poroshenko and Finance Minister Oleksandr Danylyuk issued statements calling the sale a result of successful reform in Ukraine, and not due to positive market conditions.
“This is a clear indicator that the whole world today is voting with money for belief in Ukraine and for the efficiency of our reform,” Poroshenko said in a statement issued from the United Nations General Assembly in New York.
Finance Minister Oleksandr Danylyuk called it “an important event in the macroeconomic and financial history of Ukraine,” saying that the $3 billion is a result of the government’s work to “cardinally change our country over the past three years.”
A little more than half of the cash generated from the sale will go to paying off previous eurobond issuances, set to expire in 2019 and 2020, with $1.576 billion going to the previous bondholders.
Dragon Capital estimated the total amount of cash earned, after subtractions for the previous bond buyback, as $1.3 billion.
The issuance – though a short-term financial win for Poroshenko’s government – has stoked concerns that the surfeit of cash will allow Ukraine to veer off the International Monetary Fund’s $17.5 billion lending package that expires at the end of 2018. Ukraine has already received $8.32 billion from the Washington D.C.-based lender.
“With looming debt exchange and eurobond issue, Ukraine does not need IMF money so little pressure to follow IMF script,” wrote Bluebay Asset Management analyst Timothy Ash in a research note shortly before the issuance. “Shame as corruption remains number one issue in Ukraine stalling growth and investment.”
Churin argued that pressure from the eurobond investors could serve to keep the government in line with legislative changes advocated by the IMF, which currently include changes to the country’s pension system, liberalization of its land market, and the establishment of a specialized anti-corruption court system.
“Right now we see a kind of confrontation between the Ukrainian government and the IMF,” Churin said, adding that the lender “really insists on going forward with these reforms right now.”
Dragon Capital analyst Olena Bilan suggested that the government still does not have enough money to continue without IMF support, and that the eurobond sale has merely “reduced the urgency” in getting foreign cash reserves.
“We doubt the authorities can deal with upcoming repayments in the run-up to (and then in the midst of) two national elections in 2019 without IMF support,” Bilan wrote.
