A creditor committee led by Franklin Templeton is disappointed that Ukraine has decided the agenda for next week’s meeting is a technical one that doesn’t constitute debt negotiations, according to person close to the committee.
Ukraine’s Finance Minister Natalie Jaresko won’t attend the talks in Washington, because they are intended to discuss the International Monetary Fund’s latest economic forecasts for the nation, she told reporters today in Kiev. The committee sees the meeting as important to progressing talks and doesn’t see them as merely technical, said the person, who asked not to be identified because the talks are private.
The disagreement represents a further setback for restructuring negotiations that have been deadlocked over the issue of a principal writedown that creditors say isn’t necessary and Ukraine insists is essential.
“This is negative for the talks,” Fyodor Bagnenko, a Kiev-based trader at Dragon Capital, said by e-mail. “One possible explanation is that the meeting was supposed to be a serious face-to-face negotiation but as bondholders seemingly weren’t backing down on their demands, Jaresko decided to skip it.”
IMF staff will hold technical meetings with Ukraine and creditors on June 30, a spokesman for the fund said today in Washington.
The creditor group, which owns about $9 billion of Ukraine’s foreign-currency debt, sent a proposal to the Finance Ministry last month that, they say, meets the IMF’s restructuring targets through maturity extensions and coupon reductions alone. Ukraine rejected the plan and returned with a counter-proposal based on updated IMF economic forecasts last Friday. The bondholders need to see the projections so that it can assess Ukraine’s offer, they said Monday.
Ukraine will impose a payment freeze in a few weeks if its restructuring proposal isn’t accepted, a person familiar with the government’s position said last Friday.
It’s “theoretically possible” that Ukraine won’t make a $120 million coupon payment due July 24, Jaresko told reporters today in response to a question about a Goldman Sachs Group Inc. note that predicted a default next month.
IMF Managing Director Christine Lagarde appeared on June 12 to back the Finance Ministry’s objection to the creditor offer when she said that servicing debt out of international reserves would be “inconsistent” with the goals of the restructuring.
The creditor committee’s proposal leaves the nation with “an appropriate level of reserves,” while acknowledging that they would be higher “absent repayments to foreign-currency creditors, including the IMF,” the group said in a statement yesterday.
It will be the IMF that tells creditors what level of reserves Ukraine should have and not us, Jaresko said today.
“Those are not talks,” she said. “It’s a technical meeting to discuss the new macroeconomic forecasts on which our new proposal is based. The macroeconomic forecasts are not public yet as we have not reached our staff-level agreement with the IMF.”
Jaresko said on June 5 that she’s willing to meet directly with the creditors and encouraged them to “remove artificial and counterproductive barriers to more constructive dialog.” On May 12, she said she had been rebuffed when she asked to speak directly with a member of the creditor group.