Ukraine sees early debt restructuring after Ukreximbank deal
By Richard Balmforth and Natalia Zinets
KIEV (Reuters) - Ukraine on Tuesday expressed confidence it would complete a debt restructuring to clear the way for fresh IMF aid next month after state-run Ukreximbank tied up a deal with a bondholders' committee to extend maturities on $1.5 billion of Eurobonds.
Near-bankrupt Ukraine is holding talks to restructure sovereign and state-guaranteed debt to plug a $15.3 billion funding gap required under an International Monetary Fund-backed $40 billion bailout programme.
Negotiations have soured with a creditors committee representing about $9 billion of debt repeating objections to any writedown on the face value of the bonds and Kiev accusing bondholders of being "unscrupulous" and lacking good faith.
But the announcement that Ukreximbank had become the first debt-owing entity to reach a preliminary agreement with bondholders brought a significant change of mood within the Kiev government.
Welcoming the "successful" conclusion of negotiations on Ukreximbank's 2015, 2016 and 2018 bonds, the finance ministry said: "The Ministry aims to complete the debt restructuring operation by the first review of the IMF-supported program scheduled for June in order to provide support for the disbursement of the second tranche."
The second tranche of credit under the IMF's $17.5 billion extended fund facility amounts to around $2.6 billion, the central bank says.
The finance ministry gave no further details on how the restructuring negotiations were going. Finance Minister Natalia Yaresko told Reuters last week that she expected to meet face-to-face with creditors as "noticeable progress" had been made in recent contacts.
STILL SEEKING A "HAIRCUT"
It appeared clear, however, that the Ukrainian side was sticking to its insistence on a writedown - or "haircut" - on debt principal.
"The Ministry of Finance underlines that the sovereign debt restructuring will also need to reduce debt levels and debt service to meet ... IMF-agreed targets," it said.
Ukraine has been pushed close to bankruptcy by a conflict with Russian-backed separatists in the east.
During public wrangling last week with Kiev's creditors, Ukraine's parliament backed a law allowing Kiev to hold back debt repayments from creditors if needed.
Although the law comes into force only once President Petro Poroshenko has signed it and although many holders of Ukrainian bonds are largely unperturbed, it has prompted protests from Russia which holds $3 billion of Ukraine's bonds and is its second-biggest creditor.
The finance ministry on Tuesday, however, appeared to be suggesting that the Ukreximbank agreement showed the mood around the restructuring talks was changing in Ukraine's favour.
According to Ukreximbank's statement, it has negotiated an agreement in principle with bondholders to extend maturity by several years on 2015, 2016 and 2018 Eurobonds with a total face value of $1.5 billion.
Conditions provided for coupon increases and early redemption of part of the principal before the newly-agreed maturity dates.
The "reprofiling" of the Ukreximbank bonds would result in savings to Ukraine's balance of payments of up to $1.5 billion for the 2015-18 period and would contribute to a target of the four-year IMF-supported programme for $15.3 billion to be generated in savings in public sector financing, the finance ministry said.
The Ukreximbank statement quoted Richard Deitz of VR Capital Group Ltd and Galia Velikmukhametyova of GLG Partners LP saying that in the current environment the proposals put forward by Ukreximbank represented "a reasonable compromise".
(Writing By Richard Balmforth; Editing by Hugh Lawson)
