December 4, 2018 / 9:57 AM / 6 days ago

UPDATE 1-EU offering euro bond to provide aid to Ukraine, Georgia

(Adds comment, further detail, ISIN for EU bond)

By Abhinav Ramnarayan

LONDON, Dec 4 (Reuters) - The European Union has opened a tap of its outstanding April 2033 euro bonds to provide 500 million euros of aid to Ukraine and 15 million euros of aid to Georgia, an EU official told Reuters on Tuesday.

The deal was connected to last week’s European Commission approval of 500 million euros ($568 million) of aid to Ukraine, the official said.

“When we go to the market to raise funds, we link it directly to the beneficiary, which explains why we are going to market now in the first week of December,” the official said, asking to remain anonymous as the matter was not yet public.

Initial marketing levels on the 15-year bond sale are at 4 basis points below mid-swaps, two banking sources said, suggesting a yield of around 1.18 percent, based on Tradeweb prices.

The EU official said the lending terms to Ukraine and Georgia will have the same maturity and coupon as the EU bond deal.

That would represent a substantial saving for Ukraine compared with its own borrowing costs in the bond market. A Ukraine September 2032 government bond, for example, was trading at a yield of 9.88 percent on Tuesday.

The deal would bring the outstanding April 2033 bond up to 2.615 billion euros. Settlement is due next Monday, Dec. 11, according to the banking sources. That means the funds will be available to the EU as early as next week.

The loan to Ukraine, the main cause for the bond deal, will come with economic policy conditions, but it is not restricted to a particular project or purpose, the official said.

Last week, the European Commission said on its website it has approved the disbursement of the 500 million euros of a new Macro-Financial Assistance programme to Ukraine. [bit.ly/2rgGmE1 ]

Commerzbank, Goldman Sachs, LBBW and TD Securities are arranging the bond issue. (Reporting by Abhinav Ramnarayan; editing by Karin Strohecker, Larry King)

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