Ukraine creditors reportedly ready for 20% haircut

Ukraine’s private creditors have suggested a 20% haircut on sovereign bonds, the ft.com news site reported on Aug. 24, citing anonymous sources close to the negotiations. Meanwhile, a spokesperson of Ukraine’s Finance Ministry told Bloomberg that the debt restructuring talks are still ongoing and nothing has been agreed upon yet.

Recall, Ukraine’s MinFin and the ad hoc creditors’ committee are negotiating the parameters of restructuring USD 20 bln in sovereign and guaranteed debt since mid-March. The key issue over which the parties have failed to compromise is the amount of debt principal to be cut. MinFin reportedly insisted on a 40% haircut, while creditors were against any amount, but later agreed to 5%, reportedly. Two weeks ago, MinFin spent three days in California in talks with the representatives of the ad hoc creditors’ committee, with no results announced. Talks are still ongoing, the two sides reported on Aug. 14.

Alexander Paraschiy: The current global stock market selloff seems to be beneficial for Ukraine as it might be easier for its creditors to fix higher losses amid the period of global turmoil. Therefore, we believe a 20% haircut (or even slightly bigger) is a possible solution, despite such a write-down not looking realistic to us earlier.

In any case, the haircut is only one of the three restructuring parameters for Ukrainian Eurobonds – their price will be also determined by the size of the maturity extension and change in coupon rates, which are also unknown parameters. But if the rumors on a 20% haircut agreement prove true, we could see a final deal very soon.

Another uncertain factor is the position of Russia, whose state-run fund owns USD 3 bln of Ukraine’s state debt subject to restructuring. Thus far, Ukraine has insisted that this debt should be restructured on par with other private creditor debt, while the Russian government has yet to respond to such a position.

Источник: Конкорд Капитал