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UPDATE 2-Ukraine's creditors say detailed debt talks still elusive
(Releads with creditors' statement, updates prices)
By Karin Strohecker and Sujata Rao
(Reuters) - A group of Ukraine's creditors expressed disappointment on Friday that no basis had yet been found for detailed negotiations with Kiev on how to restructure its debt.
Kiev and a creditors' committee led by Franklin Templeton had earlier held a teleconference aimed at reaching a deal to enable Ukraine to meet targets attached to a $40 billion bailout package led by the International Monetary Fund.
Ukrainian sovereign bond prices had hit multi-month highs before the talks and held onto most of their gains despite the statement, capping a week of robust rises fueled by hopes that creditors might achieve a debt restructuring deal with a smaller loss than previously expected.
The two sides have been at odds over deal terms, with the committee rejecting Ukraine's insistence that they take a haircut, a reduction in the bonds' face value. Friday's statement suggested little progress had been made.
"The Committee submitted a burden-sharing proposal in early May that would provide approximately $15.8 billion of liquidity relief to the country and meet the three IMF criteria," the creditor committee said in a statement emailed after the talks.
"We are disappointed that we have not yet found the basis for detailed negotiations between principals and continue to believe that it is in the interests of Ukraine for such discussions to commence as quickly as possible."
The creditors say their plan can save Ukraine $15.8 billion, without forcing a haircut on creditors.
Ukraine wants to secure a debt restructuring deal as soon as possible to keep loan disbursals from the IMF on track.
Friday's bond price rises had come in part from investors hoping for a deal, said Robert Burgess, chief emerging markets economist at Deutsche Bank.
"Some people are speculating that we are close to a deal and the haircut will be smaller than expected," Burgess said, pointing to the IMF's recent endorsement of Ukraine's reform progress, better-than-expected budget numbers and moves to remove capital controls as fueling optimism.
"This is all positive but I'd be surprised if that changed the fiscal arithmetic so dramatically that the objectives of the debt operation were going to change and there was less need for a principal reduction," he said.
Dollar-denominated bonds due in 2017 and 2022 gained 2.750 cents and 2.875 cents respectively, both venturing above the 50 cents in the dollar threshold for the first time since mid-February <XS080875819=TE >.
The 2023 bond stood 2.5 cents higher after earlier hitting the highest level since mid-January. The issue stands almost 20 cents above end-March troughs.
Ukraine's average yield spreads over U.S. Treasuries tightened 78 basis points to 2664, the tightest since February on the EMBI Global index. Spreads have snapped in more than 300 bps this week.
Andre Andrijanovs, a strategist at Exotix, said the bonds were now trading as if only a very small haircut would be imposed and any rise to 60 cents in the dollar would imply no haircut and only a maturity extension.
"Not having haircuts sounds like a very optimistic scenario ... Some people think there could be more progress than earlier expected and there are some players who thought maybe they were too short and decided to buy," Andrijanovs added.
Separately, Ukraine's finance ministry requested holders of securities considered for restructuring to disclose their identity by June 11, according to a document seen by Reuters on Friday. The list of bonds includes a $3 billion Eurobond held by Russia, whose full repayment is due by the end of the year.
Moscow has threatened to take Kiev to court if Ukraine fails to repay its debts to Russia. (Additional reporting by Marc Jones and Sudip Roy; Editing by Gareth Jones/Ruth Pitchford)
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