Publication: Ukraine – Ukrzaliznytsia Modernization Strategy: Policy Note 4 – Debt Management
Date
2019-06-24
ISSN
Published
2019-06-24
Author(s)
World Bank Group
Abstract
This note focuses on the current debt
situation of UZ, the associated risks and ways to manage
them. It does not address broader financial sustainability
issues and how to finance the investment backlog. This is of
paramount importance and should be a priority for future
work. This note uses an analysis of the available audited
financial statements in the January 1, 2014 -June 30, 2018
period to discuss risks and concerns regarding the financial
viability of the UZ going forward given the near-critical
liquidity situation and widespread solvency concerns in the
financial markets. This note suggests some steps for
ameliorating the present dire liquidity situation: (i) A
clear market opening and corporate restructuring strategy;
(ii) detailed review of the asset valuation exercise carried
out by reputable asset evaluators; (iii) based on the
results of asset revaluation, seek Government consent to
sell non-core assets and (iv) seek support in raising
substantial investment resources at reasonable cost
necessary to carry out the adopted modernization strategy
and reach sustainable levels of business operation in the
medium-to-longer run (such as increasing the share of
current assets by selling non-core fixed assets such as land
and buildings). Any sustainable solution going forward,
hinges on an open commitment to market opening and deep
organizational and management restructuring programs
discussed in other policy notes. Given the ownership
structure, political and social importance of UZ, and the
legal status of the company, this cannot be done without
full ownership and support of the government (including the
Ministry of Finance). Additionally, given the size of the
company and present institutional and governance risks,
successful restructuring and changed perception of domestic
and international financial markets will critically depend
on the credibility of the program.
Citation
“World Bank Group. 2019. Ukraine – Ukrzaliznytsia Modernization Strategy: Policy Note 4 – Debt Management. © World Bank, Washington, DC. http://hdl.handle.net/10986/32288 License: CC BY 3.0 IGO.”