(Bloomberg) -- Ukraine wants an agreement with bondholders on how to restructure its debt before the International Monetary Fund’s first bailout review in June, as the government in Kiev looks to gain $15 billion from creditor negotiations.
The discussions should follow a “fair and equitable process” and won’t include a voluntary early repayment of $3 billion in bailout bonds received from Russia, which has signaled it won’t take part in the talks, Ukraine’s Finance Ministry said in an e-mailed response to questions.
“Privileging one bond series through early repayment would not be fair to other creditors enjoying similar rights,” it said.
Ukraine will start negotiations with bondholders once the IMF’s Board of Directors approves the financing deal announced Feb. 12, a package that includes $17.5 billion from the Washington-based fund. The aid is needed to boost foreign reserves and avert default after a pro-Russian insurgency in the nation’s eastern industrial base devastated the economy and helped turn the hryvnia into the world’s worst-performing currency in the past year.
“Debt operations may include a variety of techniques for reducing debt service, including using the super-majority voting procedures embedded in the terms of the bonds to change their terms,” the ministry said. “It may also include exchange offers for new securities with different terms. We are considering a range of options which would help us achieve our objectives.”
Bonds Slump
Holders of Ukraine’s foreign-currency bonds have lost 22 percent in the past 12 months, the second-worst performance among 59 nations in the Bloomberg Emerging Market Sovereign Bond Index after Venezuela. The country’s benchmark dollar-denominated bonds maturing July 2017 closed 2.4 cents lower at 54.2 cents on Friday.
Fitch Ratings reduced Ukraine’s sovereign credit score by one step to CC late Friday, leaving it as the lowest-grade sovereign that isn’t in default. The IMF bailout will “help to close Ukraine’s financing gap, but an associated restructuring of privately-held external debt appears increasingly probable,” Fitch analyst Charles Seville said in a statement.
The Finance Ministry said Ukraine had hired White & Case LLP as legal adviser for the debt restructuring. The ministry earlier confirmed Lazard Ltd. as financial adviser and coordinator for the talks.
To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net
To contact the editors responsible for this story: Wojciech Moskwa atwmoskwa@bloomberg.net Paul Abelsky, Robert Valpuesta
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