Ukraine said it wants to make progress this month in talks to restructure about $23 billion of debt even as it continued to insist on a writedown that creditors including Franklin Templeton have said they won’t accept.
The country seeks to achieve results in negotiations “in a couple of weeks,” Finance Minister Natalie Jaresko said during a U.S.-Ukraine Business Council roundtable in Kiev on Thursday. Ukraine needs to alter terms on 29 bonds and loans to meet the conditions of a $17.5 billion International Monetary Fund loan granted to help the nation after a yearlong conflict in its eastern regions stifled the economy and drained reserves.
The IMF’s first review of the bailout falls on June 15, increasing the pressure on the government and a five-member creditor group led by Franklin Templeton to find common ground fast. Ukraine last month rejected the first proposal of the committee, which owns about $10 billion of the nation’s debt, because it didn’t involve a reduction to principal holdings. June will be a “critical month,” Jaresko said today.
“Time is running out,” Regis Chatellier, a director of emerging-market credit strategy at Societe Generale SA in London, said by e-mail Thursday. “In September-December you have the heavy bond redemptions, so a deal needs to happen before this summer.”
The government’s $500 million of notes due Sept. 23 climbed for a third day, adding 0.29 cent to 51.30 cents on the dollar by 5:05 p.m. in Kiev. Its $1.25 billion of bonds maturing in April 2023 rose 0.7 cent to 47.81 cents on the dollar.
Jaresko reiterated that a combination of maturity extensions and writedowns to principal and coupons was required to meet IMF conditions. When Franklin Templeton’s group put forward its proposal last month, it said the offer would provide Ukraine with “necessary financial liquidity support” without such losses.
Negotiations with bondholders “are not finished, we are not there yet,” Jaresko said. “This restructuring is a very very complicated transaction, with a large number of pieces of debt and a very short period of time to achieve success.”
While the IMF said last week that it is “vital” for Ukraine to reach a deal with creditors by next month, analysts from Morgan Stanley and JPMorgan Chase & Co. have said the lender may continue to finance Ukraine even if it fails to meet debt-sustainability targets.
The restructuring probably won’t be completed by June and creditors will push for “piecemeal restructurings” on liabilities that are falling due, Christopher Granville, managing director of Trusted Sources U.K. Ltd., said in an interview last week.
Ukraine’s foreign-exchange reserves fell to a record $5.6 billion in February before the first tranche of IMF aid boosted them to almost $10 billion the following month.