Ukraine may announce debt restructuring results today at noon

The Ukrainian government may sign today a deal on restructuring up to USD 20 mln of its sovereign and guaranteed debt with key debt holders, the nv.ua news site reported on Aug. 26, citing its sources in the Finance Ministry. The ministry itself hasn't commented, but Ukrainian Prime Minister Arseniy Yatsenyuk hinted at the possible deal on Aug. 26. “There is good financial news for Ukraine”, he tweeted in the evening, attaching a photo of himself smiling alongside Finance Minister Natalie Jaresko. “A special meeting of the Cabinet will take place tomorrow at 12:00 p.m."

Earlier this week, international media reported that the sides are close to a deal after the ad hoc creditors committee agreed to a 20% haircut.

The IMF-supported debt operation aiming to restructure USD 18.0 bln in government Eurobonds, USD 2.0 bln in guaranteed debt and USD 3.7 bln in Eurobonds of state enterprises and the city of Kyiv started on March 13. The restructuring of government Eurobonds and guaranteed debt involves maturity extension, reducing the face value of debt and cutting the interest rate.

Alexander Paraschiy: No doubt, finishing almost six months of talks on debt restructuring is good news for Ukraine. We do not rule out a rally in Ukrainian sovereign Eurobonds today as soon as more information on their restructuring parameters is available. As of now, we can only guess that the possible agreed amount of the haircut is 20% and maturity extension is about seven years.

The key unknown as of this moment is new interest rates – whether they will be decreased proportionally on all the bonds, or if an equal new rate will be applied to all of them. At the current prices of Ukrainian sovereign bonds, they would yield 8.8% (UKRAIN Oct’15 note) to 13.0% (UKRAIN Jul’17 note) assuming a 20% haircut, a seven-year maturity extension and a coupon decrease by 1/5. Assuming the same extension and haircut, but applying an equal coupon rate of 4.5%, the Ukrainian bonds would yield 7.8% (UKRAIN Apr.’23) to 10.0% (UKRAIN Jun.’16).

Another unknown is the fate of a USD 3 bln Eurobond due in December 2015 that’s held by the Russian State Welfare Fund. Its representatives were not a member of the ad hoc creditors committee, and the Russian president insisted that this bond cannot be treated as a private loan. If Putin is able to persuade the IMF that this bond should be treated as an official loan (meaning Ukraine will have to repay it), that would offset most of the positive results of Ukraine's debt operation.

Источник: Конкорд Капитал