Investors are ready to acquire VAT bonds at a 20% discount

Investors are ready to acquire VAT bonds at a 20% discount

Last Friday the Perspektiva Stock Exchange began trading VAT bonds of the first tranche emitted by the government of Arseniy Yatsenyuk. According to the reports from the exchange, securities were traded at the rate of UAH 800-810 per unit at a nominal rate of UAH 1,000, which is a 20% discount. Investment Capital of Ukraine cut the largest deal to the tune of UAH 100.675 mn. The company did not disclose the names of the companies with which it closed deals on the purchase of their securities. However, as Capital was informed traders cut deals with such companies as Industrial Union of Donbas, ArcelorMittal Kryviy Rih, the Poltava Ore Enrichment Plant, Kernel Trade and Suntrade, which earlier conceded the possibility of the emission of government bonds in order to replenish the working capital.

As a reminder, the government set a ceiling of UAH 7 mn for the emission of VAT bonds. The Ministry of Finance made the first emission of VAT bonds in the amount of UAH 3.576 bn on July 8, the recipients of which were large enterprises.

The second tranche of government bonds for the compensation of the VAT in the amount of UAH 3.42 bn was planned this week (before August 1), said Director of the State Fiscal Service Ihor Bilous. At the same time, the Cabinet of Ministers informed Capital that the second tranche will be issued no sooner than August. “The Ministry of Finance recommends not to inject huge amounts of money onto the market as this will immediately destabilize the situation, but instead do so gradually in portions. This will prevent a drop in demand for such bonds. Foreign investors have interest in this,” a source in the government told Capital. This is how Minister of Finance Oleksandr Shlapak plans to create a separate market for such bonds in the inter-bank sector without attracting the funds of the National Bank of Ukraine.

Traders confirm that the demand among non-residents is quite high. Managing Director of the Investment Capital of Ukraine group Kostyantyn Stetsenko says if companies want to sell bonds on the secondary market, the demand for them will be formed by local banks and to a greater degree by foreign investors. “The latter are prepared to invest around US $300-400 mn (UAH 3.6-4.8 bn) in the next month or two,” Stetsenko told Capital.

Ukrainian banks may be more interested than foreign banks. “Today, several banks remain liquid, while active crediting of the economy has not been restored due to the anti-terrorist operation. For this reason, VAT bonds may be a more lucrative option for investment. Moreover, a 20% discount provides for a quite attractive profitability,” said the chairman of the board of one of Ukraine’s major banks, who requested anonymity. Earlier the government decreed that securities would be amortized, 5-year bonds with coupon earnings equal to the rate of the NBU’s discount rate of 12.5% per annum from July 17. The coupon is paid out once every six month with amortization of 10% of the total amount.

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