KYIV

State-owned Ukrainian Railways, Ukrzaliznytsia, has placed five-year Eurobonds worth $300 million at 7.875 percent per year.

J.P. Morgan and Dragon Capital acted as advisors and bookrunners of the issue. The issuer was Rail Capital Markets Plc.

The company said that investors showed strong interest – demand was twice as much as the company’s supply, tickets for financing were received from over 70 investors, predominantly from the UK and Switzerland.

“On the back of the challenging previous fiscal year, it is worth noting the confidence of investors in Ukrainian Railways as a responsible borrower that duly meets all its financial obligations,” Ivan Yuryk, the company’s Acting Chairman of the Management Board, said in a statement.

Markets analysts said that the yield substantially exceeded the 7 percent range that they had expected before the issue.

Ukrzaliznytsya, the country’s railway state operator, plans to use funds to service the state debt and to repay a loan from Ukraine’s Sberbank and free up the liquidity for operating purposes.

“The bond issue will not increase the total quantum of Ukrainian Railways’ debt portfolio but will only reduce its short-term liabilities with a further positive effect on the company’s credit rating,” Yuryk said.

Standard & Poor’s in April downgraded the long-term credit rating of the Ukrainian railway state operator to “CCC” from “B-” due to possible problems with debt servicing.

In May, Ukrzaliznytsyahas finalised an agreement to partially reschedule its debt repayment to Sberbank, postponing a major part of the debt maturing in May-end till the end of 2021 and leading to a significant balancing of cash flows and liquidity of the company.

In May 2020, Fitch Ratings has placed Ukrainian Railway’s long-term Issuer Default Rating (IDR) on Rating Watch Negative (RWN).

The rating action followed the revision of the Outlook on Ukraine’s IDRs and reflected the agency’s view of the company’s tightened immediate liquidity position not fully offsetting debt servicing in 2020, underpinned by the negative impact of the coronavirus pandemic on the nation’s economy.

“The RWN reflects the company’s worsened liquidity position, which we assess as weaker,” Fitch said in a statement.

It said that the company’s access to domestic liquidity sources could further deteriorate due to mounting negative effects related to the coronavirus pandemic.

Ukrainian Railway’s 2020 debt amortisation schedule included repayments of up to nine million hryvnias ($330,000) by the end of 2020, which materially pressured its already weakened liquidity position.

Ukrainian Railway is Ukraine’s integrated railway group with core operations in the domestic freight segment. It owns 11,481 grain-hopper railcars which make the company the largest rail logistics operator.