Ukrainian Bank Reaches Deal With Creditors on $1.5 Billion Bonds

Ukraine’s third-biggest bank reached a deal with a creditor group to change terms on almost $1.5 billion of bonds amid a wider restructuring of the eastern European nation’s sovereign debt.

State Export-Import Bank of Ukraine, known as Ukreximbank, said holders of close to 30 percent of the principal of its 2015, 2016 and 2018 bonds are in favor of the deal, which includes seven-year maturity extensions. The agreement also offers no writedowns to principal holdings and raises coupon payments, according to a statement on the bank’s website.

The lender’s $600 million of 2018 bonds rallied 2.5 cents to 68.70 cents on the dollar at 3:32 p.m. in Kiev after Ukreximbank said it will increase the coupon payment by one percentage point to 9.75 percent. The proposal, which will undergo a consent-solicitation process starting early June, includes a 50 percent principal payment in January 2021 for the 2018 notes, with the remainder disbursed in eight equal semi-annual installments thereafter.

The deal represents the first stage of a $23 billion restructuring that Ukraine wants to complete in time for an International Monetary Fund review next month as it seeks to get the next slice of a $17.5 billion loan. The government has insisted that a deal with sovereign creditors must include a principal writedown, while a group of investors led by Franklin Templeton has said IMF targets can be reached without a so-called haircut.

Ukreximbank is one of three state-owned companies, including AT Oschadbank and Ukrainian Railways, whose creditors are receiving preferential treatment relative to the sovereign in the nation’s debt restructuring because they don’t have government guarantees. For that reason, their bonds will only be used to meet the first of three IMF-mandated targets.

“The results of the negotiations are fully in line with the objectives of the IMF supported program,” the Finance Ministry said in an e-mailed statement. The ministry “underlines that the sovereign debt restructuring will also need to reduce debt levels and debt service to meet the three IMF-agreed targets.”

http://www.bloomberg.com/news/articles/2015-05-26/ukrainian-bank-reaches-debt-restructuring-deal-with-creditors