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Ukraine Markets Daily (January 30, 2015)

Market news

  • IMF mission will continue negotiations with the Ukrainian government 
  • The NBU appointed curator to Oschadbank
  • Avangard to pay dividends to minority shareholders, postpone payment to ULF 

Market comment

The UX Index was down by 0.8% on Thursday, and down by 1.3% in the US dollar terms, while the PFTS index was up by 0.8% in UAH terms. Seven out of ten companies in the UX index were down in the UAH terms with the largest decrease in prices observed for Alchevsk MP (-4.7%), Bank Aval (-2.9%) and DonbassEnergo (-2.6%).

 On the interbank exchange market, the USD/UAH spot rate was up by 0.5% with the closing price of 16.38 (mid price) on Thursday, according to Minfin.com.ua, while the average exchange rate reported by the NBU was 15.95.

Ukraine 5-year CDS were down by 1.5% on Thursday.


IMF mission will continue negotiations with the Ukrainian government

According to Interfax news agency, the IMF mission did not finish its work on January 29 as was expected earlier. The mission will continue negotiations with the Ukrainian government for an indefinite term. Current IMF mission should take decision on whethere to accept the request from the Ukrainian government for extended fund facility program.

Our view:

The news is negative for the Ukrainian economy. The prolonged negotiations clearly indicate that the government hasn’t managed yet the preparation of the realistic state budget and satisfactory program of reforms. Consequently, the delivery of funds from the IMF will happen a few weeks later that the government expected, and Ukraine will remain without support during this time. Moreover, the National Bank of Ukraine will not provide considerable support to the national currency, and it may provoke the new wave of devaluation.


The NBU appointed curator to Oschadbank

According to the Ukrainian media, the National bank of Ukraine appointed curator to Oschadbank, who will supervise activities of the bank till January 1, 2016. Former deputy CFO of Platinum bank Oksana Ischenko was appointed to this position. According to the recent non-public NBU regulations, the NBU should appoint curator to all banks, which received refinancing from the National Bank.

Our view:

The news is neutral for Eurobonds of Oschadbank. The NBU decision means that the National Banks aimed to increase control over the activity of state-owned Oschadbank, as the bank posted UAH 8.5 bn losses in 2014. The appointed curator can help the bank to recover its profitability in 2015.


Avangard to pay dividends to minority shareholders, postpone payment to ULF

According to the press-release of Avangard [AVGR LI], the largest producer of shell eggs and egg products in Ukraine, the company intends to call an Extraordinary General Meeting (EGM) to gain shareholder approval for the dividend distribution to minority shareholders of record on 14 October 2014 in the amount of USD 6.6 mn (USD 4.625 per share). Avangard noted that the Board of Directors proposed to postpone the dividend payment of USD 22.9 mn to its majority shareholder (UkrLandFarming) until a later date. The EGM of shareholders is expected to be held on February 25, 2015. Following the EGM the distribution date of the dividend payment is expected to be during the week of March 2, 2015.

Our view:

The news is POSITIVE for the company stock considering the company remained silent on the reasons of the dividend distribution delay since the end of 2014. Paying the dividends to minority shareholders while postponing the payment to the ULF ensures that the company retains some liquidity to conduct its current operations at a time when access to capital markets is limited, while economic conditions remain challenging. It also presents the company’s intention to fairly treat all company’s stakeholders: minority shareholders, bondholders and banks.

However, the fact of delay in payment and the reasons of dividend delay pointed out by the company: challenging economic and political conditions, sharp UAH devaluation and continuing conflict in the East of Ukraine – send signal on potential restructuring of Avangard’s 2015 Eurobonds. In our view, the company might consider exchanging its Eurobonds due in 2015 for longer-maturity bonds and some cash consideration. 

Please refer to our flash note on the potential restructuring of Avangard’s Eurobonds dated January 30, 2015 to receive more information.

Meanwhile we remain upbeat on the company’s cash flow generation capabilities despite the challenging environment and will shortly update our view and valuation estimate on AVGR.



Although the information in this report has been obtained from sources which Empire State Capital Partners believes to be reliable and was collected in good faith, we do not represent or warrant its accuracy, except with respect to information concerning Empire State Capital Partners, its subsidiaries and affiliates, either expressly or implied, and such information may be incomplete or condensed. Nor has the information and/or data been independently verified, and so is provided without further caveat regarding its reliability, suitability for commerce or specific purpose. 

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Ukraine Markets Daily

Market news

  • MHP is to refinance its 2020 Eurobonds with the new issue

Market comment

The UX index remained unchanged on Friday as well as the PFTS index due to holidays. The WIG-Ukraine index increased by 0.6%. On the interbank exchange market, the UAH/USD remained unchanged too at UAH 26.10 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 26.35.

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