Russia insists that Ukraine should recognize USD 3 bln debt as official

25 января 2016 года
Конкорд Капитал

The Russian government is ready to negotiate on restructuring Ukraine’s USD 3 bln Eurobond after Ukraine recognizes it as official debt and would be ready to offer better conditions than what it offered to commercial creditors, Russian Finance Minister Anton Siluanov said on Jan. 22, as cited by the Interfax news agency. “Kyiv is continuing to insist that the bonds purchased by the Russian Federation are not official debt, even though the IMF recognizes it official,” Siluanov said. He insisted that these bonds were incorrectly included in the list of bonds held by commercial creditors which Ukraine restructured in autumn 2015. “Ukraine cannot claim it is ready to negotiate with good faith efforts and at the same time insist that it only can consider the restructuring scenario offered to commercial creditors,” Siluanov said.

Recall, the holders of USD 15 bln in Ukrainian Eurobonds agreed on Oct. 14 to restructure all bonds outstanding, with a single 7.75% coupon rate and annual repayments in nearly equal amounts between September 2019 and September 2027. A Russian state fund, the holder of an additional USD 3 bln in Eurobonds, declined to attend the bondholder meetings. On Dec. 16, the IMF recognized the USD 3 bln Eurobond as “an official claim for the purposes of the Fund’s policy on arrears.” According to the IMF’s amended policy on lending into official arrears, Ukraine is not obliged to pay Russia as an official creditor, but nevertheless it has to “make good faith efforts” to try to agree upon the debt restructuring. Otherwise, the IMF should stop cooperaton with Ukraine. One of the IMF officials stated during a Dec. 10 conference call his vision that “good faith efforts” means that the debtor “approached its creditor … as an official creditor.”

Alexander Paraschiy: By making such statements, Siluanov is demonstrating Russia’s advantage in negotiations with Ukraine in restructuring the USD 3 bln debt. If Ukraine does not approach the Russian side as an official creditor, it won’t fully comply with the IMF’s vision of how “good faith efforts” should look like. In case the IMF rules Ukraine is not making “good faith efforts,” the Fund won’t be able to provide a new tranche to Ukraine. However, if Ukraine recognizes the “Russian debt” as official, it will harm its defense in an international court. Recall, Russia is going to demand repayment of the USD 3 bln debt in a London court. At this stage, there is a chance that the court won’t recognize this debt as official (disregarding the IMF’s decision), but only if Ukraine continues to claim so. If Ukraine is able to defend its position that this debt is commercial, it will be able to demand that the Russian side should agree on the restructuring conditions earlier offered to other commercial creditors. Otherwise, Russia would demand much better repayment conditions for its side.

We expect Russia will press the IMF by trying to prove Ukraine is not making good faith efforts, thus trying to block disbursement of new IMF tranches to Ukraine. However, we continue to believe the IMF will treat the Ukrainian government as making good faith efforts as a debtor of Russia. By doing this, it will give a chance to Ukraine to defend its position in court and secure the restructuring conditions that are in line with the targets of IMF’s EFF program.

Источник: Конкорд Капитал


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