Azernews.Az

By Bloomberg

State Export-Import Bank of Ukraine bonds climbed to a three-week high on speculation creditors will get better terms on the lender’s debt as the nation seeks $15.3 billion from restructuring.

Ukreximbank’s $750 million of notes due April 27 jumped 8.9 cents to 56.9 cents on the dollar after the finance ministry said state-owned lenders will be treated differently because of their importance to the banking system and Ukraine’s economic recovery. The bonds and those of AT Oschadbank will be used toward achieving only one of the three targets of an International Monetary Fund-led bailout program valued at about $40 billion.

The special treatment may limit the size of writedowns on the value of the bonds, according to Standard Bank Group Plc and Jefferies Group LLC, as investors brace for bigger losses on Ukrainian sovereign bonds. The east European nation, whose bondholders include Franklin Templeton and the Russian government, is seeking to push through changes to the terms on 29 bonds and enterprise loans by the end of May to secure the IMF aid.

“There is an understanding that target one means just a maturity extension and no haircut,” Tim Ash, chief emerging- market economist at Standard Bank in London, said by e-mail on Tuesday. “Ukreximbank seems to be important for managing international state financial transactions, and Oshadbank is important for domestic financial transactions.”

The first of the three IMF-mandated targets is to cut $15.3 billion from public-sector financing costs over the period of the program, the finance ministry said in a statement on Saturday.

Creditor Group

The second involves bringing Ukraine’s public and publicly guaranteed debt-to-gross domestic product ratio to below 71 percent by 2020, while the third is to keep the budget’s gross financing needs at an average of 10 percent of GDP in 2019- to-2025 period.

Ukrainian bonds have plummeted since Russia annexed the Crimean peninsula over a year ago and separatists began an insurgency in the nation’s east, with the sovereign’s $2.6 billion of dollar-denominated Eurobonds trading below 41 cents on Tuesday.

Oschadbank’s dollar bonds maturing in October 2016 climbed 0.2 cents to 42 cents on the dollar at 3:12 p.m. in Kiev.

Franklin Templeton and four other leading Ukraine creditors have set up a committee to negotiate debt-restructuring terms with the government, a person close to the talks said last week, paving the way for talks to begin.

Ukreximbank asked creditors last month to agree to push back the maturity date on its dollar bond to July 27 from April 27, according to a document on its website. The voting deadline on the proposal is April 9 and a meeting will be held on April 13 at the offices of White & Case LLP in London, the legal firm that Ukraine has appointed to advise on its broader restructuring process.