The Ministry of Finance placed UAH 4.8bn ($116m) of hryvnia-denominated bonds at a primary auction yesterday.

Fitch Ratings has affirmed Metinvest’s Long-Term Foreign Currency Issuer Default Rating (IDR), Local Currency IDR and senior unsecured rating at CCC. The agency said its assessment reflected the issuer’s heightened operating and financial risks along with benefits from production assets outside of Ukraine. Fitch estimated that 20% of the group’s 2024 EBITDA would be generated by its foreign assets. The agency noted that Metinvest’s logistical constraints eased following the reopening of Ukrainian Black Sea ports and resumption of seaborne exports, projecting that its iron ore production would increase to 60% of the pre-war level in 2024, followed by moderate recovery in 2025-2026. Fitch expects Metinvest’s adjusted EBITDA to moderate to $800m in 2024 and $750m in 2025 from $1bn in 2023 amid lower iron ore and coking coal prices, which would offset recovering sales volumes. Still, the company should remain positive on the free cash flow level, supported by growing sales and low CAPEX offsetting working capital outflows.

President Volodymyr Zelensky said at a press conference yesterday that Ukraine was working to complete preparations for a second peace summit by November and wanted Russia to participate in it. As part of these preparations, Ukraine plans to organize, in August and September, three international meetings at the level of national security advisors, in Qatar, Turkey and Canada, to discuss energy security, freedom of maritime navigation and exchanges of prisoners of war — the points of Zelensky’s 10-point peace plan that the first peace summit, held in Switzerland in June, discussed.

Naftogaz announced its decision to capitalize deferred interest on its 2025 (previously 2022) and 2026 (previously 2024) Eurobonds. The capitalized amounts, $12.7m on the 25s and EUR 94.6m on the 26s, increased the respective bond principals to $331m and EUR 695m.

On Jul. 19, Naftogaz is to make first payments on its Eurobonds following the 2022-2023 restructuring, including a $165m amortization on the 2025 bond and $58m of accrued interest on the 2025 and 2026 (EUR) papers.

The Ukrainian Economy Ministry estimated real GDP growth in June at 1.1% y-o-y (+/-1pp), bringing the 1H24 tally to 4.1% y-o-y, down from an est. 4.7% in 5M24. The latter reading was revised upwards from 4.3% after the statistical office reported 1Q24 flash real GDP growth of 6.5%. The Ministry said its 1H24 real GDP estimate was consistent with its full-year forecast of 3.5% y-o-y (recently downgraded from 4.6%).

According to the latest monthly survey conducted by the Ukrainian Institute for Economic Research (IER), the percentage of manufacturing enterprises operating at a capacity load of 75%+ (compared to pre-war level) stood at 57% in June, flat m-o-m, with the share of idle firms also remaining virtually unchanged at 4%. Power outages became the major concern cited by respondents last month, mentioned by 65% of firms, up from 41% in May. Security risks followed on 54%, down from 56% in May, and input cost growth was third on 46%, flat m-o-m. Labor constraints were mentioned by 42% of companies, down from 49% in May. Other obstacles to doing business included demand weakness, supply chain disruptions, and complicated logistics.

Russian advances remain marginal despite high tempo of assaults

The NBU on Jul. 10 announced a new package of F/X liberalization measures intended to facilitate debt servicing by local companies and attract investments. Among the key changes, the central bank permitted companies to repatriate dividends to service Eurobond coupons (on top of previously introduced “new” dividend limits) provided that: the company is a guarantor under Eurobonds issued by a foreign entity the respective Eurobond was in circulation as of Jul. 10, 2024 the local company and foreign Eurobond issuer have a common parent the amount of repatriated dividends corresponds to the sum of scheduled coupon payments under such Eurobonds falling due after Jul. 10, 2024 dividends can be repatriated not earlier than 10 days before the coupon payment falls due multiple guarantor companies are permitted to repatriate dividends to service coupons under each Eurobond, yet within the amount of scheduled coupon payments The NBU also changed a number of other regulations, permitting local companies to transfer abroad war insurance premiums to foreign companies whose shareholders include a foreign state; reimburse the expenses of a foreign lender related to a loan guaranteed by a foreign credit agency, foreign government or IFI; purchase foreign currency to make provisions for IFI loans.

DTEK Renewables has secured required consents from its bondholders to extend the maturity of its $325m Eurobond by three years and change other terms of the notes.

Ukraine’s headline CPI rose by 2.2% m-o-m in June, speeding up from 0.6% in May and bringing the y-o-y reading to 4.8%, up from 3.3% in May. Core inflation, an indicator adjusted for administratively regulated tariffs and prices of raw foods and energy, accelerated to 0.5% m-o-m from 0.3% m-o-m in May, pushing the y-o-y tally to 5.0% from 4.4%.

Fitch Ratings affirmed its long-term issuer default rating (LT-IDR) on Ukrenergo and its Eurobond at CC. The assessment reflected weakness in Ukrenergo revenues due to a drop in electricity consumption in Ukraine during the war and the need for additional CAPEX to make the power system more resilient to Russian attacks. Lower collection of trade receivables resulted in a liquidity drain, which the company covered with a EUR 150m EBRD loan, yet payables may keep growing if collection does not improve.

The NATO summit in Washington approved a Pledge of Long-Term Security Assistance for Ukraine, committing to provide “a minimum baseline funding of EUR 40bn within the next year” and maintain “sustainable” volumes of military aid going forward “for Ukraine to prevail.” This assistance will cover purchases and in-kind supplies of weapons, related maintenance and logistics costs, military training costs, and investments in Ukraine’s defense industry. Future NATO summits, starting from 2025, will re-evaluate allies’ individual contributions to Ukraine. In addition, the alliance decided to establish the NATO Security Assistance and Training for Ukraine to coordinate the provision of military aid and training by allies and partners with the aim of putting it “on an enduring footing”.

Crude steel production in Ukraine totaled 3.9 Mt in 1H24, up 37% y-o-y, with finished and semi-finished steel output rising by 32% y-o-y to 3.1 Mt and hot metal production up 22% to 3.5 Mt. The reported 1H24 data imply June steel production of 735 kt, down 0.4% m-o-m but up 68% y-o-y. Hot metal production fell by 3.8% m-o-m to 629 kt, still up 29% y-o-y, while finished and semi-finished steel output dropped by 3.9% m-o-m to 572 kt (+45% y-o-y). Daily production averaged 24.5 kt in June, up 2.9% m-o-m and 68% y-o-y.

The Ministry of Finance placed UAH 4.7bn ($117m) of hryvnia-denominated bonds and $186m of USD-denominated paper at a primary auction yesterday, after raising UAH 9.1bn ($224m) last week.

In a joint statement, the leaders of the United States, Germany, Italy, the Netherlands and Romania announced their collective donation to Ukraine of four PATRIOT and one SAMP-T strategic air defense systems, promising to announce additional deliveries of similar systems later this year.