UPDATE 1-Creditor group delivers new restructuring plan to Ukraine

Karin Strohecker

Tuesday, 12 May 2015 | 5:14 AM ETReuters

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LONDON, May 12 (Reuters) - A committee of Ukraine's biggest creditors said on Tuesday it had delivered a new, detailed proposal to Kiev to strike a compromise between Ukraine's need to restructure debt and creditors objective to avoid a principal writedown.

The ad-hoc creditor committee, which includes investment firm Franklin Templeton and represents investors holding bonds worth about $10 billion, also said it had not seen "substantive engagement" by Kiev or its advisers on initial proposals the group had delivered four weeks ago.

Ukraine needs to achieve savings of around $15 billion via debt restructuring as part of an International Monetary Fund-backed (IMF) economic turnaround package. That was put in place after a year-long war and political upheaval that has seen Ukraine's currency plummet and its economy tumble.

Around $23 billion worth of debt is earmarked for restructuring under the plan which Ukraine says must include a "haircut" or writedown in the bonds' principal and coupons. The creditors have steadfastly opposed haircuts.

The group said in the statement however that it was ready for formal discussions on its new plan.

"The committee has now delivered a detailed restructuring proposal based upon IMF assumptions," the ad-hoc committee said in an emailed statement.

"This is a compromise that balances the stated debt reduction interests of Ukraine and one of the investors' objectives of avoiding a principal reduction."

The bondholders issued their statement as an IMF mission was due to arrive in Kiev to review progress with conditions of its $17.5 billion four-year loan.

Ukraine expects a second tranche of about $2.5 billion to be disbursed under the programme after the review.

The committee said it was willing to support a "prudent" debt restructuring, though it did not give further details of what the compromise would entail.

The finance ministry in Kiev declined to comment.

Ukraine's sovereign dollar bonds, which are trading roughly 45-48 cents in the dollar, weakened slightly after the statement, with the July 2017 issue trading 0.4 cent lower.

(Additional reporting by Natalia Zinets Editing by Jeremy Gaunt)

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