News and events

Ukreximbank reopens EEMEA bonds with $350m blowout
- Issue: 969 - September 1 2006

“After a month-long hiatus, the eastern Europe, Middle East and Africa (EEMEA) new bond issue market was reopened in triumphant style this week by Ukreximbank, which sold its $350m Eurobond oversubscribed and at the tight end of guidance.

“The five year deal for the State Export-Import Bank of Ukraine was led by Credit Suisse, Deutsche Bank and UBS.

“It is the largest ever from a Ukrainian bank and the first from an EEMEA borrower since late July, when Yasar, the Turkish food and chemical conglomerate, sold its $150m 9.5% deal through Dresdner Kleinwort.

“Ukreximbank began a five day roadshow for its Reg S deal in Hong Kong last Thursday (August 24) before touring Singapore, Vienna, Frankfurt, Geneva and Zurich and finishing in London on Wednesday.

“As the only EEMEA borrower in the market and the first to bring a deal for a month, Ukreximbank enjoyed investors’ undivided attention.

"All summer we’ve been encouraging borrowers to get deals done early. All the Europeans are back in the office and it’s not difficult to catch their attention," said Chris Tuffey, head of EEMEA syndicate at Credit Suisse in London.

“On Tuesday, the bookrunners released price guidance in the 7.75% area and by Wednesday morning the deal was fully subscribed. By midday on Wednesday the book was more than twice subscribed, allowing the leads to tighten guidance to 7.65%-7.75% on Wednesday afternoon.

“With more than $1.1bn of orders, and with Ukraine’s sovereign notes rallying by 2bp- 3bp in the course of the day, the book was closed at midday yesterday (Thursday) and the deal priced at 7.65%, the tight end of the revised guidance.

“Ukreximbank’s outstanding $250m 6.8% 2012 bonds were yielding 7.8% when this week’s deal was launched and its 2009 notes 7.3%.

“Crucially, and unlike borrowers in June and July, Ukreximbank did not have to pay a hefty new issue premium. This week’s transaction came 5bp inside Ukreximbank’s theoretical curve. The notes traded up in the secondary market to close last night at 100.40 bid.

“UK investors took 54% of the deal, Switzerland 12%, Germany 8%, Asia 8%, Austria 5%, Netherlands 5%, Greece 2% and other investors 6%. Funds bought 62%, retail investors 15%, banks 14%, insurers 5% and others 4%.

“Private banks accounted for about 18% of the book, a high figure considering that retail investors generally prefer more yieldy instruments, a banker on the deal said.

“Timed to perfection

“In a market starved of new paper, Ukreximbank gave investors exactly what they had been craving: exposure to high quality emerging European credit — and more specifically to Ukraine.

"Investors have been keen to get back into Ukraine," said Igor Hordiyevych, executive director in debt capital markets at UBS. "There has been very little supply this year, with the political turbulence that hit in March."

“The bank also benefited from its status as a proxy for the sovereign. Ukreximbank has a letter of support from the government and is the agency for the Ukrainian government in its international dealings.

“Its status as a frequent and successful issuer was another appealing element for investors. "Ukreximbank has become well respected as a high quality professional issuer in the two years it has been in the capital markets," said Hordiyevych.

“The deal’s timing meant that it slotted neatly into a window before the announcement of non-farm payroll employment figures in the US today (Friday). "The risk is that the number won’t come in," said one banker on the deal. "And who knows what that will do to the market?"

“Ukreximbank’s deputy chairman, Mykola Udovychenko, told EuroWeek yesterday: "We are very satisfied with the outcome. Investors appreciated our high quality performance and we had a very high conversion ratio from meetings on the roadshow to orders. We would like to pay tribute to the great efforts of the lead managers."

"This is a vindication of both the strategy of coming to the market now and of the credit story," said Hordiyevych.

“The deal is only the third public Eurobond issue from a Ukrainian borrower this year and the first since the March elections, when political deadlock gripped the country, causing new bond issuance to dry up completely.

“However, the cloud lifted in early August, when President Viktor Yushchenko put an end to months of political stalemate by agreeing to form a government with Viktor Yanukovych, the rival he ousted in the Orange Revolution of 2004.

“Ukreximbank… had sold its second subordinated issue through UBS in February. The 10 year non-call five deal was placed semi-privately.

The success of this week’s issue opens the way for other Ukrainian issuers to tap the market in the second half of the year…”

© Euromoney Institutional Investor Plc

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http://www.euroweek.com/default.asp?Page=1&SID=649082&ISS=22422