Ukraine’s third-biggest bank said its creditors won’t face a reduction to their principal bondholdings if they vote for a three-month maturity extension on debt due this month.
The State Export-Import Bank of Ukraine, known as Ukreximbank, will probably default if creditors reject the extension at a meeting on April 27, when $750 million of notes fall due, according to a statement on its website. The lender’s notes climbed to a two-month high.
“The statement raises a glimmer of hope for bondholders that they will not face a default after all,” Per Hammarlund, the chief emerging-markets strategist at SEB AB in Stockholm, said by e-mail. “That may have contributed to the jump.”
The statement indicates the bank bowed to pressure from creditors after it failed to get enough attendance at a meeting on April 13 for the debt extension, according to Landesbank Berlin Investment GmbH. Ukreximbank lowered the quorum threshold for the forthcoming meeting, requiring one third of investors to attend rather than two thirds the first time around. Of those who vote, it needs 75 percent in favor to pass the motion.
Failure to secure a yes vote on April 27 “will, in all likelihood, result in a breach by the bank of the obligation to pay principal or interest on the notes as they fall due,” Ukreximbank said in the statement Wednesday. It said the interest due on the debt will be paid on time if the resolution succeeds.
“It would have saved a lot of trouble and bad press if they had said this earlier,” said Lutz Roehmeyer, who oversees about $1.1 billion of emerging-market debt at Landesbank Berlin, including $1 million of Ukreximbank’s 2015 notes. “This behavior shows that they needed a push from the market,” he said by e-mail.
Ukreximbank, which has a total of $1.48 billion of outstanding bonds, said it will seek a maturity extension of no more than 10 years in the final restructuring. The 2015 bonds climbed for the first time in four days, adding 1.63 cents to 63.63 cents on the dollar by 7:26 p.m. in Kiev.
The notes have traded at a premium to the sovereign since the Finance Ministry said on April 4 it planned to treat Ukreximbank and AT Oschadbank differently from the wider debt overhaul due to their importance to the country’s economic recovery and banking system.
Specifically, the banks’ debt will be excluded from targets to lower Ukraine’s debt to 71 percent of gross domestic product by 2020 and the budget’s gross-financing needs to an average of 10 percent of GDP from 2019 to 2025.
Talks over the lender’s debt schedule are part of a larger effort by Ukraine’s government to restructure at least $23 billion of bonds and loans by the end of May to meet conditions for the second part of a $17.5 billion aid package from the International Monetary Fund.
Ukraine’s Finance Ministry will give a presentation to investors on Friday on the sidelines of an IMF meeting in Washington.