Azernews.Az

By Bloomberg

The creditor group negotiating with Ukraine over its $19 billion debt restructuring has no plans to revise a proposal that was rejected by the nation’s government, a person familiar with the talks said.

The bondholders oppose writedowns to principal because they’re not necessary to reach the International Monetary Fund’s targets and would therefore lead to restricted capital-markets access for the sovereign and companies, said the person, who asked not to be identified because the talks are private.

Ukraine’s Eurobonds fell the most in almost three months this week as a verbal battle between the government and creditors escalated. Finance Minister Natalie Jaresko said Wednesday that the country will stop servicing its debt if no progress is made on talks. The bondholder committee, led by Franklin Templeton, said yesterday it’s “deeply concerned” by Jaresko’s stance.

A two-month impasse in negotiations is hardening as coupon payments come due this month and a $500 million note matures in September. Jaresko has repeatedly said that any restructuring agreement must include a so-called haircut to the face value of bonds while creditors have insisted that is not necessary to fulfill three IMF-mandated targets.

The creditor proposal includes a debt-for-equity swap whereby coupons are only paid if gross domestic product reaches a certain level, the person said.

The proposal seeks to extend maturities of Ukrainian bonds by as much as 10 years, while lowering the nation’s interest and principal burden in the first four years, a person with knowledge of the committee’s thinking said on May 29. The offer achieves a reduction of about $500 million on interest payments, the person said.

IMF Forecasts

The maturity extensions differ from bond to bond and the plan will yield savings for Ukraine of $15.8 billion in the first four years, exceeding the IMF’s $15.3 billion target, according to the person on May 29. In the latter years, Ukraine would need to pay higher coupons and gradually repay principal.

The creditors may make adjustments to its offer based on revised IMF economic forecasts when it receives them, the person said today.