IMF to meet with Ukraine creditors, consider status of “Russian” bond

The IMF executive board will consider the status of USD 3 bln in Ukrainian Eurobonds, due in December, that was purchased by Russian National Welfare Fund in 2013, the Bloomberg news agency reported June 22, citing an anonymous source. According to the source, the IMF staff has formed the preliminary view that this bond should be treated as official debt, not private, as the Ukrainian government insists. The IMF’s policy on lending into arrears allows a country it cooperates with to not pay on some private debt, but does not allow it to do so with official debt. Meanwhile, the Russian Finance Ministry reported that Ukraine has made a USD 75 mln coupon payment (due June 22) on that debt, according to the RIA Novosti news agency.

Meanwhile, the committee of creditors that holds more than USD 8 bln of Ukraine’s debt demanded a joint meeting with the Ukrainian government and the IMF, Radio Free Europe/Radio Liberty reported on June 22. They also demanded that the IMF provide updated forecasts on the Ukrainian economy, which have been reportedly downgraded since those provided at the start of External Funds Facility program in March 2015. The IMF said it will participate in such talks next week in Washington, according to Bloomberg.

Alexander Paraschiy: The exclusion of the “Russian” 3 bln Eurobond from the pool of debt subject to the debt operation will complicate significantly the debt restructuring process, we believe, as the rest of the creditors will have to share a much bigger burden. Out of the total USD 23 bln in debt that the government and its related companies are going to restructure, only USD 20 bln was initially targeted to be subject to the haircut, which was reportedly planned at a level close to 40%, or USD 8 bln. The exclusion of Russian debt will reduce this pool to just USD 17 bln, increasing the size of haircut to 50%. Even more, if the IMF indeed downgraded its macro outlook for Ukraine for 2020, the targeted amount of the haircut could be even bigger and more painful for private creditors. Recall, the haircut is aimed at keeping Ukraine’s state debt-to-GDP ratio at below 71% as of 2020.

That said, we believe yesterday’s developments significantly decreased the chance that Ukraine will be able to get any haircut. In any case, next week’s possible meeting between the Ukrainian government, the IMF and private creditors should prove decisive on the future of Ukraine’s debt operation.

Источник: ICU