Saturday, June 15, 2024

Ukraine and bondholders rush talks, avoiding $20 billion debt default

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A group of international creditors began closed talks with Ukraine this week, as the two sides work to prevent the country from defaulting on its $20 billion in international debt while it fends off an invasion by Russia.

A group of bondholders under a creditor committee entered into non-disclosure agreements with the government this week, according to people with direct knowledge of the matter, who asked not to be named because the talks are confidential. 

The agreements will allow the government to share non-public information to facilitate discussions, one of the people said. Another person said bondholders and Ukraine are in restricted discussions as part of a consultation period to start a negotiation process.

“Restricted” in the context of restructuring negotiations usually refers to talks that are covered by non-disclosure requirements as well as temporary trading limitations because the topics under discussion may be market-sensitive.

Moratorium Expiring

The creditor group was first formed in April, but payments on Ukraine’s outstanding international bonds have been halted for more than two years since Russia attacked, upon an agreement with the bondholders. The moratorium the two sides agreed upon then is set to expire in August, raising the stakes for them to reach a deal quickly.

Representatives for the bondholder committee declined to comment. A spokesperson from Ukraine’s finance ministry also declined to comment. The IMF is not a direct party to the talks with bondholders, but its spokeswoman Julie Kozack said yesterday in Washington that they were “on track.”

The group representing bondholders includes Amundi, BlackRock and Amia Capital. JT Partners Inc acts as its financial adviser and Weil, Gotschal & Manges LLP is legal adviser to bondholders, while the country is represented by Rothschild and White & Case as financial and legal advisers, respectively.

The International Monetary Fund said on Thursday that talks between Ukraine and bondholders are on track, adding that the economic outlook for the remainder of the year remains highly uncertain as the war continues. Under its $15.6 billion IMF program, Ukraine had said it aimed to complete the debt treatment with private creditors no later than mid-2024.

The country’s dollar bonds due in 2035 were trading at 27.63 cents on the dollar, while the bonds due in 2026 were the best performers in emerging markets by percentage gained as of 4 p.m. in London, according to data compiled by Bloomberg. 

Ukraine also has so-called GDP warrants maturing in 2041 whose payments are linked to economic growth, and which were trading at 51.70 cents on the dollar.

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