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Tuesday, October 21, 2008

Deal Near On $15 Billion IMF Loan For Ulraine

Ukraine seems to be on the point of signing a loan worth as much as $15 billion with the International Monetary Fund. Agreement could be reached as early as next week as the government urgently seeks to inject cash into domestic banks and avoid an economic meltdown, Prime Minister Yulia Timoshenko said.

Talks about the loan are "90 percent" completed, Timoshenko said at a press conference in the Ukrainian capital Kiev today. Talks with the IMF may be completed tomorrow. Once signed, the pact will need to be approved by lawmakers, who are expected to vote on it by the end of the week, the premier said. "The talks are almost finished with the IMF and we've almost agreed on what necessary changes to laws we have to make to get the loan,'' Timoshenko said.

Tymoshenko said the loan would be used to bolster central bank reserves of $35-38 billion and prop up the banking system. "The financial resources, which will be received from the IMF, will be directed first of all towards making central bank reserves stronger and, secondly, to supporting the national banking system," she told a briefing.

Hyrvnia Falls Again

Ukraine's hryvnia weakened for a fifth straight day against the dollar today as the government continued to negotiate with the IMF and Fitch Ratings extended its cut of Ukraine's credit rating to 10 of the former Soviet republic's banks. The currency dropped 0.4 percent to 5.5200 per dollar by 11:18 a.m. in Kiev, from 5.4975 late yesterday, after earlier falling to 5.5500, the lowest level against the dollar since Oct. 9.

Fitch Downgrades Banks

Fitch Ratings today downgraded the Long-term Issuer Default ratings (IDRs) of 10 Ukrainian banks and their Support ratings, and revised downwards the Support Rating Floors of four of these banks. The Outlooks on the Long-term IDRs remain Negative. This follows the downgrade of Ukraine`s Long-term foreign and local currency IDRs to `B+` from `BB-` (BB minus) with Negative Outlook (see the announcement on `www.fitchratings.com`).

According To Th Statement

The downgrade of the IDRs and Support ratings of Swedbank, Forum, ProCredit Ukraine, VTBU, UkrSib, Ukrsots and Pravex reflects the downgrade on Ukraine`s Country Ceiling to `B+` from `BB-` (BB minus). The Country Ceiling of Ukraine limits the extent to which support from the shareholders of these banks can be factored into their Long-term foreign currency IDRs, and their Long-term local currency IDRs also take into account Ukrainian country risks.

Swedbank is 100%-owned by Swedbank AB (`A+`/Negative), Forum is majority (60%+one share)-owned by German Commerzbank AG (`A`/Rating Watch Negative), ProCredit Ukraine is 60%-owned by Germany`s ProCredit Holding AG (`BBB-` (BBB minus)/Stable), VTBU is more than 99%-owned by Russia`s JSC Bank VTB (`BBB+`/Stable), UkrSib is 51%-owned by France`s BNP Paribas (`AA`/Stable), Ukrsots is 94%-owned by Italy-based UniCredit (`A+`/Negative) and Pravex is 100%-owned by Italy`s Intesa Sanpaolo (`AA-` (AA minus)/Stable). The Long- and Short-term IDRs and Support ratings of these banks reflect the limited probability of support being forthcoming from their majority shareholders, in case of need.

The downgrade of the Long-term IDRs and Support ratings of Oschadny and Ukreximbank reflect the reduced ability of the government to provide support in case of need as reflected in the downgrade of Ukraine`s Long-term IDRs. Oschadny`s and Ukreximbank`s Long- and Short-term IDRs and Support ratings reflect Fitch`s view of the strong propensity of the Ukrainian authorities to provide support for these banks in case of need, although the ability to provide that support is less certain now. Both Oschadny and Ukreximbank are 100%-owned by the state (represented by the Cabinet of Ministers of Ukraine). Non-binding letters of support from the government have been provided in the offering circulars of Ukreximbank`s international debt issues (the most recent dated March 2007).

The downgrade of the Privat bank`s Support rating and revision of its Support Rating Floor reflects Fitch`s view that the Ukrainian authorities now have limited ability to provide support if required, as reflected in the `B+` sovereign Long-term IDRs, although there is a propensity to support the bank in case of need, based on Privat`s size and importance to the Ukrainian banking sector: it is the country`s largest bank (privately owned) with a share of approximately 10% in sector assets and 15% in retail deposits.

The downgrade of the Long-term and Short-term IDRs and revision of the Support Rating Floor of Nadra Bank reflect the reduced ability of the government to provide support in case of need, despite the propensity of the latter to provide such support to a bank of Nadra`s size. Nadra is the seventh-largest Ukrainian bank by asset size, with a presence in the retail segment and about 3.4% of system assets at end-H108.

Unfortunately, even the weather isn't brightening things up at the moment:

Ukraine to see cold weather and fogs this week

No precipitation expected in Ukraine tomorrow. The country will see fogs at night and in the morning. According to the National Weather Center, the night temperature will make 0-5 C degrees above zero. The temperature during the day will make 11-16 C degrees above zero.

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