UKRAINE-CRISIS/DEBT Ukraine reaches 'win-win' deal with creditors on $18 billion debt

Record ID: 142285

  • Title: UKRAINE-CRISIS/DEBT Ukraine reaches 'win-win' deal with creditors on $18 billion debt
  • Date: 27th August 2015
  • Summary: KIEV, UKRAINE (AUGUST 27, 2015) (REUTERS) EXTERIOR OF UKRAINIAN GOVERNMENT BUILDING SIGN READING (Ukrainian): "GOVERNMENT BUILDING" UKRAINIAN PRIME MINISTER, ARSENY YATSENIUK, CHAIRING GOVERNMENT MEETING MINISTERS INCLUDING UKRAINIAN FINANCE MINISTER, NATALIA YARESKO (IN MIDDLE), AT MEETING (SOUNDBITE) (Ukrainian) UKRAINIAN PRIME MINISTER, ARSENY YATSENIUK, SAYING: "Ukraine has reached an agreement with the committee of creditors on restructuring and partial writedown of our debts. Thanks to the efforts of the finance minister and the country's government, we managed to receive the following conditions: first - 20 percent of the country's debt obligations will be written down by our creditors." UKRAINIAN COAT OF ARMS ON WALL (SOUNDBITE) (Ukrainian) UKRAINIAN PRIME MINISTER, ARSENY YATSENIUK, SAYING: "In the nearest four years Ukraine will not call in the principal of the loan and our obligations, which we should have paid starting from 2015, are now extended for four years." CAMERAMAN (SOUNDBITE) (Ukrainian) UKRAINIAN PRIME MINISTER, ARSENY YATSENIUK, SAYING: "Under no circumstances will Russia receive better conditions than other creditors. It is their decision. You either accept our conditions or you will never receive better conditions." YARESKO WALKING TO PODIUM (SOUNDBITE) (Ukrainian) UKRAINIAN FINANCE MINISTER, NATALIA YARESKO, SAYING: "This situation is called 'win-win' both for our country and creditors. Thanks to the fact that creditors met our request, our country will receive substantial financial relief and will be able to get back to a stable economic life faster." MINISTERS APPLAUDING TO YARESKO
  • Embargoed: 11th September 2015 13:00
  • Keywords:
  • Location: Ukraine
  • Country: Ukraine
  • Topics: General
  • Reuters ID: LVAA4HEC6DDZ65LVJCA611PYXYYV
  • Aspect Ratio: 16:9
  • Story Text: Ukraine reached what its finance minister called on Thursday (August 27) a "win-win" deal with its largest group of creditors to ease repayments on its $18 billion debt, winning breathing space for an economy drained by the cost of fighting with pro-Russian separatists.
    The agreement, which includes a write-down of 20 percent of the principal owed, ended months of tense negotiations aimed at helping to keep Ukraine on track with its International Monetary Fund-led bailout programme, plugging a funding gap and preventing a unilateral debt default.
    The creditors, led by Franklin Templeton and including other asset managers, accepted a small increase in the coupon on most of the bonds to 7.75 percent and extended each maturity by four years. However, it must be approved by creditors outside the group.
    Ukraine said the deal, announced on Thursday, would reduce the payments due over the next four years by $11.5 billion.
    "Ukraine has reached an agreement with the committee of creditors on restructuring and partial writedown of our debts. Thanks to the efforts of the finance minister and the country's government, we managed to receive the following conditions: first - 20 percent of the country's debt obligations will be written down by our creditors," said Prime Minister Arseny Yatseniuk.
    "In the nearest four years Ukraine will not call in the principal of the loan and our obligations, which we should have paid starting from 2015, are now extended for four years," Yatseniuk added.
    A reduction in the payments due over the next four years will free up funds to help the war effort in the east, support the poor, cover purchases of Russian gas over the winter period and help keep the national currency, the hryvnia, stable according to a factsheet issued by the finance ministry.
    The country's sovereign dollar bond prices surged and debt insurance costs fell after the details were released.
    Ukraine and the creditors said in a joint statement they would work together "to ensure the rapid implementation of the deal."
    But though Yatseniuk and Ukraine's Finance Minister Natalia Yaresko savoured a victory after months of gloom, there was a question mark over whether the other creditors would fall in line.
    The joint statement appealed to other bondholders to approve the deal and urged the international community to provide non-debt support to Ukraine in the form of grants. In Washington, IMF chief Christine Lagarde said it was important that the agreement gained "broad support from all concerned eurobond holders".
    Yaresko said she hoped it was "highly unlikely" remaining creditors would reject the agreement and forecast that the process would be wrapped up by the end of October.
    However, a dispute immediately took shape with Russia, one of Ukraine's main creditors which holds $3 billion of Ukrainian debt in a eurobond that falls due in December.
    In a quick reaction to news of the restructuring deal, Russian Finance minister Anton Siluanov said Moscow needed foreign currency and therefore could not participate in Ukraine's restructuring agreement. This suggested that Moscow would insist on repayment in full of the $3 billion.
    Yatseniuk, speaking at a government meeting, said Ukraine would not offer a better debt deal to Russia than to other creditors.
    "Under no circumstances will Russia receive better conditions than other creditors. It is their decision," he said.
    Kiev has long insisted that the $3 billion owed to Russia is part of the sovereign and sovereign-guaranteed bonds to be restructured under the agreement.
    Defaulting to Russia would carry fresh risks for Ukraine because the IMF is not officially allowed to continue lending to a country that is in default to another sovereign.
    Ukraine's 2017 dollar bond issue firmed 8.7 cents to trade at 64.5 cents in the dollar on news of the deal according to Tradeweb data, while the 2022 bond rose 10 cents.
    Yaresko on Thursday said the deal meets all targets set by an International Monetary Fund bailout programme.
    "This situation is called 'win-win' both for our country and creditors. Thanks to the fact that creditors met our request, our country will receive substantial financial relief and will be able to get back to a stable economic life faster," she said during government meeting.
    Talks had been held up by disagreement with creditors on whether to provide Kiev with a writedown on the face value of the bonds. Kiev had initially sought a 40 percent 'haircut.'
    In the past few weeks Kiev had suggested that if it did not get a deal it was ready to risk international disfavour and suspend repayments, effectively going into default.
  • Copyright Holder: REUTERS
  • Copyright Notice: (c) Copyright Thomson Reuters 2015. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: None
Register