Ukraine bond financing at a time of crisis

Ukraine bond financing at a time of crisis

Ukraine bond financing at a time of crisis

By Jeff Sanford

Violence is flaring in the Ukraine again, just days before a presidential vote.

Sixteen soldiers have been killed near a checkpoint following an attack by pro-Russian insurgents. No word on what is happening with a US-backed bond Ukraine government bond offering announced a week ago.  

May 16th, Bloomberg and Reuters reported the U.S. Agency for International Development signed a $1 billion sovereign loan guarantee with Ukraine, that the government had begun marketing a US$1bn five-year US-backed bond. The float would deliver some much needed cash to Ukraine. The country needs almost $8 billion this year to meet debt payments. The money would join EU cash, IMF funds, and Russian bailout money flowing into the government.

At the time of the report, investment bank were said to "face a delicate decision about whether to get involved in such a politically charged transaction,”   Questions were raised: Would their be a cost to potential Russian business? "There is the risk of association with the new Ukrainian government. How will it be perceived in Moscow?" wondered a commenter at the time.

Bank of America Corp. upgraded Ukraine’s bonds to market weight from underweight this week. Michael Hasentab, manager of the mighty   $70.1 billion Templeton Global Bond Fund said he is “more excited” about the prospects for the country than a year ago. Bonds prices have been rallying.

Optimists note it would be insane for Putin to trash Ukraine finances by upping the price Russia charges for natural gas. "Russia needs a solvent Ukraine," said the source. The US-backed bond is supposed to float before the coming election, May 25th, would deliver $1 billion to the national treasury.