| Galt & Taggart Weekly Market Watch (July 13-July 17) |
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20/07/2009 17:45 (936 Day 16:47 minutes ago) | |||||
Lagging the recent equity market growth trend, Bank of Georgia ’s (BGEO LI) share price declined in London, trading at around US$ 4.50 on low volumes, before recovering back to the US$ 5 range in early trading Monday. The Georgia sovereign Eurobond remained steady, while yields have fallen on Bank of Georgia paper (BKGEO 2012) to 21% from a peak of 55% in March, and are currently being offered at a price of 77.5. After a long pause in trading, People’s Bank (AMB GG) and United Telecom (UTC GG) traded on the Georgian Stock exchange last week. UTC declined 14% from its last trade more than six months ago to GEL 0.3, and People’s Bank was off 20% to GEL 0.032 from GEL 0.04.
See attached file for detailed market data.
Ukraine’s industrial production accelerated 3.1% m/m in June (1H09 -31.1% y/y) after posting a 1.3% m/m growth rate in May, according to the State Statistics Committee. Output fell 27.5% y/y last month, a smaller decline than the 31.9% y/y fall posted in May and April. Ukraine ’s three key industries – chemicals, steel, and machine building – staged a monthly recovery, growing 4.2% m/m (down 25.2% y/y vs. 34.2% in May), 1.1% m/m (--39.3% y/y vs. 43.4% in May), and 6.9% m/m (-48.0% y/y vs. 53.0% in May), respectively.
Ukraine posted a 5M09 US$ 2.2bn merchandise trade deficit vs. US$ 8.8bn in 5M08 and US$ 1.9bn in 4M09, according to State Statistics Committee data. The monthly trade deficit continued trending narrower, closing 41.2% m/m to US$ 291.7mn in May. 5M09 exports declined 44.1% y/y to US$ 14.4bn and imports fell 52.0% y/y to US$ 16.6bn. Natural gas imports accounted for US$ 3.9mn, or 23.5% of total merchandise imports. May imports declined 58.5% y/y to US$ 3.2bn, while exports were down 53.8% y/y to US$ 2.9bn. 5M09 exports to the US (-4.5x y/y), Europe (-2.1x), and CIS (-46.8%) dropped considerably, while exports to China (+2.6x y/y) and India (+2.4x) increased owing to ferrous metal deliveries.
IMF reaches preliminary agreement on US$ 3.3bn loan tranche
The IMF Mission completed the second review of its US$ 16.4bn stand-by arrangement with Ukraine and will submit a letter of intent to the Executive Board with a recommendation to approve a US$ 3.3bn loan tranche by early August. PM Tymoshenko announced the government will use US$ 1.9bn of the funds to meet upcoming external debt obligations (including the US$ 500mn sovereign Eurobond in early August and the US$ 500mn Naftogaz Eurobond in late September). Head of the Mission Ceyla Pazarbasioglu noted Ukraine ’s macroeconomic and fiscal policies are broadly on track, and base money, net international reserve, and general government balance performance criteria were met as at end-May. She also said the government has made good progress in resolving systemic banks’ problems, and is committed to strengthening the financial sustainability of state lenders Ukreximbank and Oschadbank.
WB revises estimate of FY09 GDP contraction to 15%
World Bank revised its expectation of Ukraine ’s FY09 real GDP contraction downward to 15% from 9%, on the back of the ongoing collapse of export demand and the drying up of capital market inflows, which had fuelled domestic demand prior to the crisis. The institution said Ukraine ’s main vulnerability was its fiscal imbalance, brought about by steep revenue falls against unrevised expenditure commitments and the large financing needs of Naftogaz. WB also improved its CPI growth forecast for Ukraine to 13.4% from 16.4%.
Banking
Alfa-Bank Ukraine last week held a noteholders meeting to discuss earlier announced restructuring options on its US$ 250mn Eurobond issue maturing 2011. As outlined in an exchange offer from July 1, the bank exercised its call option on the notes, and noteholders will receive 10% of the par value in cash and 90% in the form of newly issued notes. The new notes will mature in 2012 and have a 13% coupon rate; principal will be paid in quarterly instalments until 2012, beginning one year after the first coupon payment. Debt restructuring meetings for the Alfa 2009 and 2010 issues are scheduled for July 23.
Ukreximbank reports US$ 2mn 1H09 net income
State lender Ukreximbank’s 1H09 net income decreased 96% y/y to UAH 12.2mn (US$ 1.6mn), according to the bank’s report. Net interest income grew 35% y/y to UAH 1.6bn (US$ 208.6mn), while provisions for bad loans were up 7.8x y/y to UAH 1.5bn (US$ 195.6mn). Ukreximbank reported a 22.94% capital adequacy ratio as July 1.
State lender Ukreximbank announced it attracted a total US$ 134.5mn in loans – a 2-year, US$ 50mn loan from the EBRD, and a 1-year, US$ 84.5mn syndicated facility from commercial lenders. The syndicated loan was organized by Standard Bank, and syndicated by Calyon, Citi Bank, UniCredit Bank Austria and Bayerische Hypo-und Vereinsbank. Additional details were not disclosed. This is the second large loan facility provided to Ukreximbank by the EBRD in 2009 after it attracted a US$ 250mn subordinated loan in May.
Finance & Credit US accounts frozen over Cargill debt dispute
According to a report in Delo, a New York court froze the corresponding US accounts of Finance & Credit Bank after it was unable to meet debt obligations before American giant Cargill. Including penalties and interest arrears, the lender apparently owes Cargill US$ 48.9mn, and has entered into restructuring negotiations over the debt.
Ukraine’s State Property Fund (SPF) plans to hold the privatization auction for a 99.6% block stake in chemicals producer Odesa Portside Plant on September 29, news sources reported. The SPF named a starting price of UAH 4.0bn (US$ 524.9mn) and price increase increments of UAH 50mn (US$ 6.6mn). The terms of auction hold the future owner responsible to invest UAH 1.3bn (US$ 170.6mn) in the plant over five years, and to meet earnings targets for the first five years of ownership.
In a 1H09 trading update, MHP SA (MHPC LI) announced volumes of chicken meat sales to external customers were up 20% y/y to 65,800t in 2Q09 and 6% y/y to 116,300t in 1H09. The increase was driven by the launch of production at MHP’s Myronivka phase two plant. The company said it was able to sell “close to 100%” of produced chicken in 1H. The average chicken meat price gained 6.5% y/y to UAH 13.86/kg of adjusted weight (ex-VAT) in 2Q09 and 12.8% y/y to UAH 13.25/kg in 1H09. MHP expects 1H09 production costs per 1kg of poultry meat to decline y/y due to the use of self-produced sunflower protein and corn in chicken fodder.
Subject to shareholder approval, CJSC Ukrainian Media Holding (Ukraine) plans to increase share capital 9.8x to UAH 3.9bn (US$ 511.8mn) by issuing 35,000 new shares at par (UAH 100), according to UkrNews. The equity will be placed between September 15 and November 15 with existing shareholders. Funds will be used to finance further company development. Galt & Taggart: In a phone call, company management confirmed to us the share capital increase is simply a fund transfer from its Netherlands-registered parent United Media Holding, itself owned by Advantest Public Limited (A65 GR), and there will be no additional placement abroad.
Romania is interested in constructing a liquefied natural gas (LNG) storage facility on the shores of the Black Sea in Georgia, according to Georgian Energy Minister Alexandre Khetaguri. The plant would theoretically facilitate greater volumes of Azeri and Turkmen gas to transit westwards. The minister said a group of specialists is set to visit Georgia in the next two weeks. Subject to the group’s findings, the two sides could meet at the beginning of September to complete a formal deal.
Frontera receives 5-year oil field exploration extension
Oil and gas explorer Frontera Resources (FRR LN) received a 5-year extension on exploration activities in Block 12, a 5,060 sq km area in eastern Georgia governed by a Production Sharing Agreement with the Government of Georgia.
Belarus’ Statistics Committee reported 1H09 real GDP expanded 0.3% y/y, Interfax reported. GDP growth fell sharply in the last month of 1H, after registering 1.4% growth in 5M09 and 1.1% in 1Q09. PM Sergei Sidorski last week predicted the GDP figure would come in level with the 1.1% reported in 1Q09. Industrial production volumes declined 3.6% y/y in 1H vs. 3.4% in 5M09.
Moody’s downgraded the LT global local currency deposit ratings for four Belarusian state-owned banks – Belarusbank, Belagroprombank, and Belpromstroibank to B1 from Ba1, and Belinvestbank to B1 from Ba2 – to reflect its belief that the weakening local economy and resulting reduced financial capacity and policy flexibility may limit the state’s ability to provide systemic support. All other key ratings remain unchanged and the outlook for all four banks’ ratings is stable, in-line with the stable outlook on Belarus's sovereign rating. Moody’s said Belarus’ worsening economic conditions will likely cause a deterioration of the banks’ financial fundamentals, particularly asset quality which will erode capital levels and pressure liquidity and profitability.
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