Ukraine Eurobond Market 2005-YTD: “Американские горки” or “Russian roulette”? November 2010 Investment Banking Division Slide 1
Ukraine 2005 - Q12010 From Hero to Zero? 6000 8,000 From the beginning of 2005 till the first quarter of 2010 there were 38 issues out of Ukraine with total face value of 16,850 million 6,000 5000 FUIB Ukreximbank restructuring 4,000 The first Sovereign follow up with a XXI Century Eurobond (10 year, XXI Century issues debt $500m benchmark) out of is the first Interpipe and warrant. transaction Ukraine after the real estate Buy back This Orange Revolution company to 2,000 transaction will tap the DCM 4000 be called 3 USD mln. F&C restructuring months later Ukrsibbank Stirol is issuing the lowest issues $500m 0 coupon (7.875%) ever Eurobond bps $125m Eurobond for an Ukrainian issuer XXI Century restructuring Interpipe issued Privatbank first 3000 -2,000 Tier 2 Issue a $200 m Eurobond for Ukrsibbank dividend now part of purposes BNPP is the last -4,000 significant transaction pre- Alfa Bank Lehman 2000 Azovstal is Ukraine Naftogaz Restructuring restructuring issuing a $175m -6,000 VAB MHP 5 year Eurobond Restruc US$250m turing first US high yield style -8,000 Eurobond 1000 -10,000 0 -12,000 05/01/2005 05/07/2005 05/01/2006 05/07/2006 05/01/2007 05/07/2007 05/01/2008 05/07/2008 05/01/2009 05/07/2009 05/01/2010 Ukraine 5 yr CDS EM Equity Fund Flows (RHS)
Q12010 to YTD: a Sustainable Recovery? 800 7,000 From the first quarter of 2010 till today there were 10 deals out of Ukraine with total face value of 5,303 million 6,000 700 Ukreximbank 5,000 reopens the market 600 Metinvest issues a 4,000 US500m Eurobond Ukreximbank in very volatile USD mln. tap market conditions 500 3,000 bps Ukraine issues 400 2,000 its largest Avangard Eurobond ever US$200m (US$2bn) issue MHP followed with an exchange offer 1,000 and a new money 300 transaction 0 200 DTEK US$500m -1,000 Eurobond issue 100 -2,000 0 -3,000 31/03/2010 30/04/2010 31/05/2010 30/06/2010 31/07/2010 31/08/2010 30/09/2010 Ukraine 5 yr CDS EM Equity Fund Flows (RHS)
Conclusion: what has changed? Better transparency – Borrowers have enhanced their corporate governance to give additional information to investor (IR department, quartely/semi-annual IFRS financials, MD&A section, annual report, conference calls) Covenant structure – Borrowers have moved from an “EM” covenant package (Stirol, Azovstal) to a European HY covenant package (MHP, DTEK, Avangard) in order to give investors comfort over the cash flows of the Company Liquidity, liquidity, liquidity – International investors are now requiring at least two Bookrunners to support the liquidity of the transaction in the secondary market during periods of volatility Timing – The Ukrainian Bond market is still a high Beta market trading on technical factors more than fundamental ones. Timing is a strategic decision which is often driving the success of the transaction
Disclaimer “IMPORTANT : This presentation has been prepared by members of our Investment Banking Division. Statements and opinions regarding the Company's investment case, positioning and valuation are not, and should not be construed as, an indication that VTB Capital will provide favorable research coverage of the Company or publish research containing any particular rating or price target for the Company's common stock. This presentation speaks only as of the date it is given, and the views expressed are subject to change based upon a number of factors, including market conditions and the Company's business and prospects. ”
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