KIEV, June 5 (Reuters) - Ukraine will repay $1 billion borrowed from VTB and issue a further $1 billion in two-year bonds with a coupon of 7.95 percent to the Russian lender, the Finance Ministry said on Tuesday.
“These will be two-year bonds - probably external. VTB will get them,” First Deputy Finance Minister Anatoly Myarkovsky said.
Sources close to VTB had said the state-controlled Russian bank wanted to roll over part of a $2 billion Ukrainian loan that was to fall due on Wednesday and receive the remainder in market-tradable securities.
The two sides held talks last week on the loan refinancing, amid continuing pressure from the International Monetary Fund on the cash-strapped Ukrainian government to hike subsidised gas prices to unblock a stalled financial aid package.
Myarkovsky said that the Finance Ministry had enough cash on hand to cope with a spike in external debt service payments that has raised concerns among Ukraine’s creditors.
“We have 21 billion hryvnias ($2.4 billion) on our accounts. We have dollars worth the equivalent of another 12 billion hryvnias ($1.4 billion),” Myarkovsky said.
Ukraine will also be able to redeem a $500 million Eurobond towards the end of June, he said. Ukraine’s budget foresees total foreign debt redemptions of $3.5 billion this year. (Reporting by Natalya Zinets,; Writing by Douglas Busvine; Editing by John Bowker)