Ukraine called a meeting with its creditors for Thursday and said this week will be crucial in reaching a $19 billion restructuring deal as time runs short for executing any agreement.
“Given the legal considerations around timely implementation of the proposal, this week will be decisive for the negotiations,” the Finance Ministry said in an e-mailed statement Tuesday as it sent a revised proposal to a Franklin Templeton-led creditor committee. Creditors requested a meeting in London at the “highest level.”
While the nation’s first Eurobond doesn’t mature until Sept. 23, the real deadline for an agreement may be mid-August because creditors must be given at least 21 days to consider any proposal before voting on it. Ukraine will probably have to freeze debt payments before the security comes due if no deal is reached this week, a person familiar with the talks said yesterday.
Franklin Templeton and three other bondholders that make up the creditor committee last week offered Ukraine a 5 percent writedown on principal, the first time they agreed to accept losses on its holdings, according to a person familiar with the proposal. That compares with the 40 percent Ukraine was said to have asked them for in June.
“Ukraine is trying to put pressure on the creditors but in reality the pressure is on Ukraine,” said Pavel Mamai, who helps oversee $140 million in emerging-market assets as co-founder of Promeritum Investment Management LLP in London. “Unless the proposal Ukraine sent today is not marginally, but significantly, better the creditors will probably hold their ground and there will be no deal this week.”
A spokesman for the creditor committee declined to comment on today’s Finance Ministry statement.
Ukraine needs to alter terms on its foreign debt as a condition for International Monetary Fund aid aimed at pulling the economy out of a recession that’s deepened in the 16 months since a battle with pro-Russian separatists erupted in its easternmost regions.
The nation’s Eurobonds rallied the most on record last month as optimism increased that a deal will be reached on time. Its $2.6 billion of bonds maturing in July 2017 were little changed at 58.15 cents on the dollar at 1:05 p.m. in Kiev after closing at a 58.39 cents on Friday, the highest level since mid-January when the restructuring was announced.
“The restructuring will happen only at the last minute before the last deadline, and possibly after a moratorium,” said Regis Chatellier, a London-based strategist at Societe Generale SA. “I am still very skeptical regarding Ukraine bonds valuations though. I think the market is quite complacent and assumes a relatively soft restructuring scenario.”