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Freitag, 28. August 2015



All those San Francisco meetings paid off.
Franklin Templeton and other private creditors will agree to swallow a writedown on their Ukrainian bonds. Cutting a fifth off bond principal, it’s much less than many expected. Bond prices were rallying hard at pixel time.
Then there is the issue of Moscow. Since Russia’s said no about restructuring its own Ukrainian bond.
Ukraine will get $11.5bn in debt relief over the next four years by extending dates on which it has to pay principal, 2015 to 2023, beyond 2019 toward 2027. This is a big part of meeting the conditions of its IMF loans, including coming back to debt markets again by 2017. Much more from the FT’s Elaine Moore here.
Ukraine also gets $3.6bn in immediate relief from the 20 per cent haircut: filleting around $19bn of debt into $15.5bn.
That seems to assume that Ukraine will not be sending $3bn out the door this December to pay Russia’s bond in full.
This is awkward, because as Bloomberg reported, Russia said no to Ukraine’s invitation to tender into the restructuring, within minutes of it hitting the wires.
Russia, as we’ve written, could use a few legal tricks up its sleeve to turn into an especially ferocious holdout, if Ukraine defaults on it (quite apart from the army it has parked on the border), if it sees good policy in doing so. Ukraine may have one or two of its own, however.
The terms of the deal also far from eviscerate holders of Ukraine’s bonds.
In return for accepting the principal haircut, investors will receive a higher coupon than on Ukraine’s bonds at the moment: 7.75 per cent, versus 7.2 per cent. The maturity extension isn’t forever (four years). Depending on where creditors see the new bonds’ yields settling after restructuring, the actual cut to the net present value of Ukraine’s will be interesting to see.
There are also (as practically de rigueur in sovereign debt deals now) GDP warrants to sweeten the write-down, although their terms aren’t massively generous: Ukraine would start paying out on them if real GDP grows more than 3 per cent after 2021, but payments will be capped around 1 per cent of GDP from then until 2025.
Russian resistance to rebuilding Ukraine’s economy, in short, is going to stick out all the more.

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