Landmark loan

Ukrzaliznytsia, the national railway company of Ukraine, received a long-awaited loan of 550 million dollars from Barclays Capital (UK) in August, at an annual interest rate of LIBOR + 2.5 percent (now close to 8 percent). Ukrzaliznytsia’s director general Volodymyr Kozak attaches special importance to this event: “For the first time in its history Ukrzaliznytsia has received a loan, and a big one at that, without any guarantees from the state or collateral. Foreign investment banks have finally come to trust Ukrzaliznytsia as Ukraine’s largest business.”

Kozak noted that the 550 million dollars have already been channeled into upgrading the infrastructure and modernizing the track structure and rolling stock. “This is just the first step. We have a big future! We have serious plans for the renovation of our key assets,” he promised. Ukrzaliznytsia statistics indicate that the company handles 86 percent of all freight deliveries and more than 50 percent of passenger transport.

But will the company be able to speed up the pace with its obsolete reserves? Kozak claims that it will take about seven years and an annual investment of two to three billion dollars to stop the aging of key assets.

The situation with preparing railroads for Euro-2012 is much the same. “Our estimates show that we’ll have to spend some six billion dollars to make this sports event a success,” says Kozak. High-speed traffic is another topic: “Ukrzaliznytsia won’t be able to cope with it single-handedly. This matter must be resolved by the state.” The company also has bills payable, currently amounting to some 700 million hryvnias. “This year, however, we reduced our debts by 800 million hryvnias, so we’re paying our clients in a timely fashion,” Kozak assured both journalists and the director general of Barclays Capital.

Kozak calls the agreement with the British bank a landmark event for Ukraine. “We will have implemented all this money by the end of the year. It will all be spent within Ukraine,” he informed journalists. Barclay Capital’s director general Hans-Joerg Rudloff is also clearly pleased by the deal. He said that initially the deal was for 300 million dollars, so 300 million turning into 550 million signifies a great success for Ukrzaliznytsia and Ukraine in general. This became possible after the market made sure that the whole transaction was truly an excellent one.

The British banker noted that he is glad to be working in Ukraine and will continue working in our country. He complimented Ukraine by pointing out that “there can be no economic growth in the world without capital investments. Capital is always very sensitive, and it stays only in companies and countries where certain conditions are met. This is proof that the world is thinking about your future progress.” Rudloff went on to say that he is not at all worried about the risks involved in this loan, even though the contract was concluded without governmental guarantees or collateral. “We consider the deal very reliable. Otherwise, it wouldn’t have been signed because we approached it very conservatively.”

In addition to the deal with the Brits, Ukrzaliznytsia has another very promising project. “We are practically ready to sign a $250 million contract with Siemens to develop and manufacture a new locomotive in Ukraine for passenger trains that can use two types of fuel,” said Kozak. But because of its business plan, this is as far as the company is likely to go this year. “We probably won’t try to obtain any more loans from foreign banks before the end of the year because we are bound by the financial plan. We have loan plans for next year, and we’re preparing a financial plan that we will submit to the government for approval.”