Ukraine eyes partial debt write-off in restructuring talks, finance minister says

G7 Finance Ministers and Central Bank Governors' Meeting in Italy

KYIV (Reuters) -Ukraine's government is in talks with international bondholders to restructure its $20 billion in debt and is discussing a partial debt write-off, Finance Minister Serhiy Marchenko was quoted as saying on Friday.

Ukraine agreed on a two-year payment freeze on its international bonds in the early days of Russia's large-scale invasion in February 2022. Kyiv wants to retain access to international markets and is keen to agree on a new deal before the freeze ends in August.

"We are currently negotiating the restructuring with creditors and, among other things, this includes partial write-off of debts," Marchenko was quoted by Interfax-Ukraine news agency as saying during a meeting with lawmakers in parliament.

Private bondholders are in restricted talks with the government according to a source who wished to remain anonymous. The move, which sets temporary trading limitations, typically signals significant progress in negotiations.

However, the source said, data from the International Monetary Fund will not be officially available until after the consultation period ends, meaning the likelihood of a deal during this period is very low.

Ukraine's public debt office within the finance ministry declined to comment on the private talks.

Answering lawmakers' questions, Marchenko said that more details on the restructuring talks would be made public in the near future.

The war with Russia is in its third year now and the Ukrainian government relies heavily on foreign financial aid to be able to finance its social and humanitarian payments. The bulk of Ukraine's state revenues goes to defence efforts.

Ukraine’s sovereign dollar bonds were little changed, with those maturing between 2027 and 2034 trading at deeply distressed levels of between 27 cents and 31 cents on the dollar, indicating markets are pricing in a write-off.

(Reporting by Yuliia Dysa and Olena Harmash, additional reporting by Karin Strohecker in London; Editing by Hugh Lawson and Gareth Jones)