Azernews.Az

By Bloomberg

Ukraine wants details on the composition of a five-member creditor group that includes Franklin Templeton before it enters restructuring negotiations, according to a person with knowledge of the matter.

Some investors don’t feel represented by the ad hoc committee established to negotiate on behalf of some bondholders, the person said on Wednesday, declining to be identified because the details are private. Five creditors that own about $10 billion of Ukraine’s bonds hired Blackstone Group International Partners LLP to advise them as the east European nation seeks to change terms on at least $23 billion of debt.

Blackstone and Lazard Ltd., which is representing Ukraine’s government in the negotiations, have been in contact, according to the person. The creditor group said last week it was working on a deal that won’t involve a writedown to their principal holdings. Franklin Templeton is Ukraine’s biggest bondholder with about $7 billion of debt.

Ukraine’s bonds have been trading at levels that indicate a reduction may be unavoidable as a yearlong crisis in the country’s east between pro-Russian separatists and government forces chokes the economy and drains reserves. The price on the sovereign’s $2.6 billion of bonds due July 2017 was 43.94 cents on the dollar by 11:50 a.m. in London, falling from a one-month high.

The Finance Ministry will give a presentation to investors on Friday on the sidelines of an International Monetary Fund meeting in Washington.

IMF Funds

There are 29 bonds and loans that fall under the restructuring program, which aims at generating $15.3 billion of savings over four years to meet the conditions of a $17.5 billion IMF bailout. Ukraine has said it needs to reach new terms on the debt by June to qualify for the second part of the aid package.

One of the notes included in the debt overhaul is the $750 million note of State Export-Import Bank of Ukraine, the nation’s third-biggest lender. Ukreximbank is asking its creditors to agree to a three-month extension on the bond due April 27 to avoid default, saying on Wednesday investors won’t face a reduction to their principal holdings if they support the motion.

“A failure to re-profile the 2015 Eurobond would make it impossible for Ukraine to meet the targets” established in the IMF program, the nation’s Finance Ministry said in a statement late on Wednesday. A reprofiling of the notes “must be satisfied in order that there be no interruption in essential financial support being provided to Ukraine by the IMF and Ukraine’s other international partners,” it said.

Russia’s Bond

The Russian government, Ukraine’s second-biggest creditor, will seek arbitration if Kiev doesn’t repay the $3 billion of bonds it holds that come due in December, Russian Finance Minister Anton Siluanov told Rossiya 1 television on Tuesday.

Russia bought the securities from the regime of former president and ally, Viktor Yanukovych, before he was toppled in a bloody uprising in February 2014. President Vladimir Putin’s annexation of Ukraine’s Crimea peninsula just weeks later triggered a standoff with the U.S. and its allies.

Ukraine’s international reserves slid by almost two-thirds to a record-low $5.63 billion in February before getting a boost last month from a $5 billion IMF injection. The economy will shrink 5.2 percent this year after contracting 6.9 percent in 2014, according to analyst forecasts compiled by Bloomberg.