Ukraine Eurobond Market 2005-YTD: or Russian - - PowerPoint PPT Presentation

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Ukraine Eurobond Market 2005-YTD: “Американские горки” or “Russian roulette”?

November 2010 Investment Banking Division

• 12,000
• 10,000
• 8,000
• 6,000
• 4,000
• 2,000

2,000 4,000 6,000 8,000 1000 2000 3000 4000 5000 6000 05/01/2005 05/07/2005 05/01/2006 05/07/2006 05/01/2007 05/07/2007 05/01/2008 05/07/2008 05/01/2009 05/07/2009 05/01/2010 Ukraine 5 yr CDS EM Equity Fund Flows (RHS)

Ukraine 2005 - Q12010 From Hero to Zero?

bps USD mln.

Stirol is issuing the lowest coupon (7.875%) ever $125m Eurobond for an Ukrainian issuer XXI Century is the first real estate company to tap the DCM Interpipe issued a $200 m Eurobond for dividend purposes XXI Century issues debt and warrant. This transaction will be called 3 months later FUIB restructuring Naftogaz restructuring MHP US$250m first US high yield style Eurobond The first Sovereign Eurobond (10 year, benchmark) out of Ukraine after the Orange Revolution Interpipe Buy back VAB Restruc turing Ukreximbank follow up with a $500m transaction Ukrsibbank issues $500m Eurobond Privatbank first Tier 2 Issue XXI Century restructuring Azovstal is issuing a $175m 5 year Eurobond Alfa Bank Ukraine Restructuring F&C restructuring

From the beginning of 2005 till the first quarter of 2010 there were 38 issues out of Ukraine with total face value of 16,850 million

Ukrsibbank now part of BNPP is the last significant transaction pre- Lehman

• 3,000
• 2,000
• 1,000

1,000 2,000 3,000 4,000 5,000 6,000 7,000 100 200 300 400 500 600 700 800 31/03/2010 30/04/2010 31/05/2010 30/06/2010 31/07/2010 31/08/2010 30/09/2010 Ukraine 5 yr CDS EM Equity Fund Flows (RHS)

Q12010 to YTD: a Sustainable Recovery?

Ukreximbank reopens the market Metinvest issues a US500m Eurobond in very volatile market conditions Ukraine issues its largest Eurobond ever (US$2bn) Avangard US$200m issue Ukreximbank tap

bps USD mln.

MHP followed with an exchange offer and a new money transaction DTEK US$500m Eurobond issue

From the first quarter of 2010 till today there were 10 deals out of Ukraine with total face value of 5,303 million

Conclusion: what has changed?

• Better transparency – Borrowers have enhanced their corporate governance to

give additional information to investor (IR department, quartely/semi-annual IFRS financials, MD&A section, annual report, conference calls)

• Covenant structure – Borrowers have moved from an “EM” covenant package

(Stirol, Azovstal) to a European HY covenant package (MHP, DTEK, Avangard) in order to give investors comfort over the cash flows of the Company

• Liquidity, liquidity, liquidity – International investors are now requiring at least

two Bookrunners to support the liquidity of the transaction in the secondary market during periods of volatility

• Timing – The Ukrainian Bond market is still a high Beta market trading on

technical factors more than fundamental ones. Timing is a strategic decision which is often driving the success of the transaction

Disclaimer

“IMPORTANT: This presentation has been prepared by members of our Investment Banking Division. Statements and opinions regarding the Company's investment case, positioning and valuation are not, and should not be construed as, an indication that VTB Capital will provide favorable research coverage of the Company or publish research containing any particular rating or price target for the Company's common stock. This presentation speaks only as of the date it is given, and the views expressed are subject to change based upon a number of factors, including market conditions and the Company's business and prospects.”