Azernews.Az

By Bloomberg

Ukraine is optimistic about clinching a debt-restructuring deal by end-May to hold on to its bailout, Finance Minister Natalie Jaresko said, after holding initial meetings with creditors from both sides of the Atlantic.

The former Soviet republic is striving to achieve $15.3 billion in savings by reducing principal, extending maturities and cutting coupons of its debt as part of a total $40 billion rescue package led by the International Monetary Fund. It needs to reduce its debt burden as a pro-Russian insurgency in its industrial eastern heartland drives the economy into recession, boosts budget spending and weakens the hryvnia currency.

Investors have pushed Ukrainian bonds to all-time lows. The benchmark dollar-denominated note due in July 2017 traded at 39.25 cents on the dollar, less than 0.1 cent higher than Monday’s record. Jaresko has met investors in the U.S. and the U.K. in recent days, including talks with Franklin Templeton, the nation’s biggest private creditor with a $7 billion bond- holding.

“I’m confident right now, given the conversations we’ve been having, that we will find a common understanding,” Jaresko said in an interview with Bloomberg Television from London on Tuesday. “If you look at the market pricing of the debt, the market has already accepted the concept that this is going to be necessary.”

Principal Reductions

She declined to give details on what kind of principal reductions investors may face on their holdings, saying it depended on still unknown factors, including how many investors sign the restructuring agreement. Ukraine needs to wrap up the talks before an end-May review of the IMF’s $17.5 billion portion of the package.

“We would be out of the program if we can’t reach a deal by May,” Jaresko said.

Ukraine’s efforts to stabilize its banks, shore up the hryvnia and tackle endemic corruption, are being undermined by continued bloodshed in the conflict. The government in Kiev and pro-Russian separatists accuse each other of breaching a February truce with attacks that are threatening to revive fighting in the almost yearlong conflict and deepen the worst standoff between Russia, the U.S. and Europe since the fall of the Iron Curtain.

Jaresko repeated her invitation for Russia, which holds $3 billion in Ukrainian bonds, to join the talks, saying she spoke with her counterpart Anton Siluanov during the past month. The Kremlin has said it’s not willing to renegotiate the debt and expects it to be paid back in full upon maturity in December.

A moratorium on Ukraine’s debt, which would delay the country’s return to international bond markets, remains an option if the country isn’t able to reach an agreement with creditors, Jaresko said.

“It’s not something we are thinking about right now. It’s not something I would like to consider,” she said. “I’d like to find a collaborative agreement. I’d like to reach an agreement with the creditors so we can have renewed access to the markets over reasonable period of time.”