The Belgian government expects to collect EUR 2.3bn in 2023-24 in taxes on the clearing house Euroclear, which manages frozen assets of the Russian central bank (CBR). The country will use these proceeds to support Ukraine, including for the provision of military and humanitarian aid, financing of reconstruction projects, and macro-financial assistance, Prime Minister Alexander De Croo said yesterday during a joint press conference with visiting Ukrainian President Volodymyr Zelensky. Zelensky praised the decision, saying that Belgium “has become the first country to launch such a practice of using frozen Russian assets for protection against Russian terror.”

DTEK Energy announced the results of its later bond buyback tender, reporting that bonds with the aggregate principal amount of $82.3m will be repurchased for $50m, with settlement expected on or around Oct. 30. The company also said that requisite consents have been secured for requested amendments to Eurobond terms, making them effective.

The Ministry of Finance placed UAH 10.3bn ($282m) of hryvnia-denominated bonds and $300m of USD paper at a primary auction yesterday.

The US International Development Finance Corporation (DFC) announced on Oct. 10 that it has committed a $250m loan for LSE-listed MHP, Ukraine’s largest poultry producer, to refinance its maturing debt and fund investments in the company’s poultry and grain production segments, including to increase its storage and transportation capacity and install electrical backups.

Ukraine’s current natural gas stocks total 15.6 bcm, including over 2.0 bcm injected into underground storage by European companies, Energy Minister Herman Haluschenko said on Oct. 9. He added that total stocks would increase to 16.5 bcm by the winter, including 3.0 bcm pumped by European customers.

Ukraine’s headline CPI inched up by 0.5% m-o-m in September following a 1.4% m-o-m drop in August but decelerated on a y-o-y basis, to 7.1% from 8.6% in August and a high of 26.6% y-o-y in December. Core inflation, an indicator adjusted for administratively regulated tariffs and prices of raw foods and energy, rose by 0.9% m-o-m in September but slowed in y-o-y terms to 8.4% from 10.0% in August and a high of 22.7% y-o-y in February.

LSE-listed MHP, Ukraine’s largest poultry producer, announced yesterday that holders of its 2024 Eurobonds maturing on May 10, 2024, had tendered $150.8m or 30.2% of the outstanding principal amount of the bonds by the early deadline of Oct. 6 set by the tender offer. The bonds tendered early will be repurchased at 85% of par. All subsequent buybacks, before the final deadline of Oct. 26, will be conducted at 75% of par. MHP is to announce the final amount of bond principal accepted for buyback on or around Oct. 27, with settlement expected on Oct. 30.

NBU gross foreign reserves declined by 1.7% ($0.7bn) m-o-m in September, to $39.7bn, still up 39% or $11bn YTD. The end-September tally was equivalent to 5.3 months of prospective goods and services imports, according to a central bank estimate. In related news, the NBU reported selling $1.15bn in the first week of October after it transitioned from a UAH:USD peg to managed exchange rate flexibility on Oct. 3.

Parliament approved amendments to the 2023 budget law, increasing the overall spending target by UAH 317bn, mostly to finance additional military outlays, and setting the planned deficit at UAH 2,010bn or 32% of the government’s 2023E GDP forecast. This extra spending is to be financed with UAH 26bn of additional revenues and UAH 291bn of borrowings.

The past week saw only marginal changes along the entire front line. Ukrainian ground operations remained focused on the Orikhiv-Tokmak axis in the Zaporizhya region in the south, where Ukrainian forces reportedly renewed their offensive in recent days after numerous Russian counterattacks in the two previous weeks failed to dislodge Ukrainian positions in the Robotyne-Verborve salient along the main Russian defensive line (see map below). Ukrainian forces also continued offensive operations south of Bakhmut in the eastern Donetsk region, making slight advances. Meanwhile, Russian forces again stepped up their assaults along the Kharkiv-Luhansk region border in the northeast, achieving marginal territorial gains as well. The Ukrainian military reported 106 Russian tanks destroyed last week, more than double the tallies in each of the two previous weeks — an indication that Russian forces indeed intensified their assaults. That said, operationally significant front-line changes continue to look unlikely in the immediate future, with attritional positional battles continuing to dominate.

DTEK Energy introduced a second set of amendments to its Eurobond consent solicitation which was initially launched on Sep. 12 along with a cash tender offer to repurchase bonds via an unmodified Dutch auction. DTEK asked to amend the definition of restricted payments (RP), introducing the so-called initial RP basket, amounting to $400m (or $350m if the company does not buy back at least $50m of bonds during the tender), and the additional basket. From the initial basket, the company can pay out up to $175m as dividends and at least 50% in the form of loans to affiliated companies. The loans may have a term of up to 5 years and shall be made on commercial arm’s length terms and subject to security in favor of the Trustee and the Security Agent. The initial RP basket would be available for use in 2023-2024. The additional RP basket would be available for use from 2023 to 2026 and equal 100% of annual bond repurchases (disregarding the current tender).

Ferrexpo reported 3Q23 pellet production of 1.3 Mt, up 17% q-o-q and 117% y-o-y, consisting entirely of 65% Fe pellets. In 9M23, pellet production totaled 3.5 Mt, down 39% y-o-y. Quarterly concentrate production stood at 98 kt (-8% q-o-q, +51% y-o-y), with 9M23 output at 257 kt (+206% y-o-y). Total production thus increased by 15% q-o-q and 49% y-o-y to 1.3 Mt in 3Q23 and was down 39% y-o-y at 3.5 Mt in 9M23.

Ukraine’s $15.6bn 4-year EFF program continues to be well executed, IMF Deputy Director for European Department Uma Ramakrishnan said yesterday during a press conference following a Fund mission’s visit to Ukraine. In the meantime, IMF mission chief Gavin Gray said that the second program review could be completed in the first half of December, leading to disbursement of a $0.9bn loan tranche. Ukraine has met all end-June quantitative performance criteria but needs to proceed with structural benchmarks, including passing a bill on politically exposed persons (PEP) and restoring tax checks with a risk-based approach. Passage of the 2024 budget law was also mentioned among near-term priorities.

Ukraine exported 2.9 Mt of grain and oilseeds in September, the third month of the marketing year (MY) 2023/24 (July 2023 – June 2024), down 4% m-o-m and 48% y‑o‑y. Grain exports totaled 2.1 Mt (-11% m-o-m and -52% y-o-y) and oilseed exports 0.9 Mt (+17% m-o-m, -33% y-o-y).

The deficit of the central budget (net of grants) provisionally totaled UAH 133bn or $3.6bn in September, virtually flat m-o-m.

The Ministry of Finance placed UAH 11.5bn ($314m) of hryvnia-denominated bonds at a primary auction yesterday.