Azernews.Az

By Bloomberg

Ukraine’s Eurobonds fell for a third day after the Wall Street Journal reported that Finance Minister Natalie Jaresko is seeking a 40 percent principal reduction in restructuring negotiations with creditors.

The nation’s $2.6 billion of notes due July 2017 slid 1.29 cents to 47.75 cents on the dollar at 12:07 p.m. in Kiev, taking their three-day drop to 4.80 cents. Bonds due in April 2023 declined 1.43 cents to 54.74 cents.

Jaresko has consistently said that bondholders must accept a writedown on principal as well as coupon cuts and maturity extensions, yet hasn’t previously revealed the details of her proposal. A creditor group led by Franklin Templeton made an offer last month that they say meets the terms of an International Monetary Fund bailout without a writedown.

“This puts the value of Ukrainian bonds at around 45, way below market levels,” Regis Chatellier, a London-based director of emerging-market credit strategy at Societe Generale SA, said by e-mail. “The hope for no haircut on Ukraine debt is/was unrealistic from the point of view of debt sustainability.”

The creditor group’s proposal to restructure about $19 billion of Ukraine’s international debt includes extending maturities by as much as 10 years, temporarily lowering coupons and amortizing principal payments over seven years starting 2019, a person familiar with the proposal told Bloomberg last month.

Jaresko has rejected the offer on the grounds that it assumes Ukraine can make payments out of its reserves, something it says is illegal.

The bonds fell yesterday after the International Monetary Fund said it can keep supporting Ukraine even if it stops payments to bondholders, raising the prospect that the country will use a moratorium law that it passed last month.

“If we are not able to make progress, creditors will force Ukraine” to impose a moratorium, Jaresko told reporters in Washington yesterday.