Ukrenergo is to receive a EUR 100m grant from KfW, financed by the EU-Ukraine Investment Facility, and a EUR 86m loan from the European Investment Bank (EIB) to finance repairs and modernization of its high voltage transmission system and construction of drone and missile protection enclosures at its substations.

Naftogaz CEO Oleksiy Chernyshov said during a Dragon Capital-hosted webinar yesterday that the company’s provisional financial plan for next year envisages full repayment of scheduled Eurobond coupons and amortizations totaling $277m. However, scheduled repayments will spike to $856m in 2026, including $752m wroth of principal, which may be difficult to manage. Consequently, there is a high probability that Naftogaz “might take a chance to discuss it and restructure it in the next stage.” With respect to the 2028 Eurobond, Naftogaz has not decided yet whether to capitalize the forthcoming coupon falling due on Nov. 8 or pay it in cash. Chernyshov said Naftogaz plans to remain on the Eurobond market and tap it again after the war.

Metinvest’s Pokrovske Coal subsidiary is preparing to commission a new longwall with reserves of 2 Mt.

WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, published 4Q24FY (April-June 2024) operating results, reporting vegetable oil sales of 384 kt (+0.5% q-o-q and +20% y-o-y). The volume of oilseeds crushed increased by 16% q‑o‑q to 951 kt (+48% y‑o‑y) following the launch of a greenfield oilseed crushing facility in western Ukraine in February this year.

The Ukrainian government announced this morning it has reached agreement in principle with the ad hoc committee of Eurobond holders and a limited number of other investors on restructuring terms covering the sovereign Eurobonds and a state-guaranteed Eurobond issued by Ukravtodor collectively totaling $23.4bn, including the PDI (the state-guaranteed Ukrenergo bond was not included). In line with our expectations, the announced agreement was built on an improved version of the Ukrainian government’s initial proposal that had been discussed with the bondholder committee during the first round of talks.

The Ukrainian government announced this morning it has reached agreement in principle with the ad hoc committee of Eurobond holders and a limited number of other investors on restructuring terms covering the sovereign Eurobonds and a state-guaranteed Eurobond issued by Ukravtodor. The agreed restructuring terms, endorsed by the IMF and Ukraine’s bilateral creditors (the Group of Creditors of Ukraine), include the issuance of two types of bond. Type A bonds would be equivalent to 40% of the principal amount of current Eurobonds plus PDI, mature in 2029-2036 and initially pay a coupon of 1.75%, with step-up to 4.50% in 2026-2027, 6.00% in 2027-2033 and 7.75% from 2034 onwards. Type B bonds, equivalent to 23% of the outstanding principal plus PDI, would mature in 2030-2036 and have a contingent component allowing for increasing the principal by up to 12% in 2029 depending on Ukraine’s real and nominal GDP dynamics until 2028.

Ukraine’s merchandise trade deficit widened to $2.9bn in June from $2.2bn in May as exports slumped by 18% m-o-m to $2.8bn (-6.5% y-o-y) while imports were flat m-o-m at $5.6bn (+12% y-o-y).

Ukraine’s iron ore exports fell by 11% m-o-m to 2.8 Mt in June (+88% y-o-y), bringing the 1H24 volume to 18.3 Mt (+120% y-o-y). In value terms, iron ore exports dipped by 1.5% m-o-m to $235m last month (+64% y-o-y), totaling $1.6bn in 1H24 (+79% y-o-y). June steel exports fell by 12% m-o-m to 316 kt (still +10% y-o-y), bringing the 1H24 volume to 2.0 Mt (+59% y-o-y). In value terms, monthly steel exports dropped by 14% m-o-m to $182m (+4.3% y-o-y), totaling $1.2bn in 1Q24 (+40% y-o-y).

Russian forces continue to make slow but steady gains in Donetsk region, around Pokrovsk, Toretsk, and Chasiv Yar

The government asked parliament to increase the military spending target in the 2024 budget law by UAH 496bn ($12bn at budgeted exchange rate of UAH 40.7:USD), bringing it to UAH 2,169bn ($53bn). The government proposed financing the spending hike with UAH 214bn ($5.3bn) of additional revenue (half of it coming from a proposed increase in the military duty and expansion of the tax base), a small reduction in debt service outlays, and higher net domestic borrowings (UAH +219bn ($5.4bn) to the equivalent of $7.4bn). Thus, the government proposed to increase the 2024 central budget deficit target by UAH 220bn ($5.4bn) to UAH 1,792bn ($44bn), or 24% of GDP.

Parliament passed yesterday a bill that authorized the government to temporarily suspend payments on external liabilities included in its restructuring perimeter until the end of the restructuring process. The Finance Ministry welcomed the speedy passage of the bill, saying that this technical decision gave the government necessary flexibility in talks with bondholders. The Ministry also specified that the newly passed bill gave the government legal means to suspend a $35m coupon payment on the 2026 Eurobond due on Aug. 1. It further emphasized that all parties involved in the restructuring process remained intent on reaching an agreement.

Naftogaz CEO Oleksiy Chernyshov said in a statement released this morning that the company has made scheduled payments on its 2025 and 2026 Eurobonds in due course.

Parliament’s budget committee has endorsed draft legislation authorizing the government to temporarily suspend payments on external liabilities included in its restructuring perimeter until the end of the restructuring process. The restructuring perimeter includes all sovereign Eurobonds, the state-guaranteed Eurobonds of Ukrenergo and Ukravtodor, commercial loans from Cargill Financial Services International, and GDP warrants. The bill also allows the government to convert the Ukravtodor bond into a sovereign bond.

The European Commission has endorsed the disbursement of a EUR 4.2bn tranche from a EUR 50bn four-year Ukraine Facility program, the first of quarterly Ukraine Facility tranches whose provision is linked to implementation of attached reforms and policy measures. The actual disbursement, which includes EUR 2.7bn in concessional loans and EUR 1.5bn in grants, is expected in September following its final approval by the Council of the EU.

The government approved a sovereign guarantee for a EUR 200m EBRD loan to Naftogaz.

Ukrainian banks’ gross UAH loans increased by 2.5% m-o-m in June on top of +1.6% in May, to UAH 790bn, bringing the y-o-y rate of growth to +14.3%. F/X lending dropped by 1.4% m-o-m and 7.0% y-o-y to $6.2bn. Meanwhile, hryvnia-denominated deposits increased by 1.8% m-o-m to UAH 1,702bn in June, accelerating from 0.9% m-o-m growth in May (and +24% y-o-y). F/X deposits rose by 0.6% m-o-m to $19.9bn (+5.6% y-o-y) following +0.8% m-o-m in May.