Kiev Goes Alone Seeking Debt Overhaul as Creditor Talks Fail

  • Kiev-creditor talks unsuccessful on debt terms, city says
  • City to seek bondholder approval for 25% face value cut

The City of Kiev is asking bondholders to approve new terms on $550 million in foreign debt after months of negotiations with a group of creditors failed.

Ukraine’s government will offer holders of notes issued by its capital city, which were due to mature on Friday and in July 2016, new sovereign bonds due 2019 and 2020 instead, the City of Kiev said in an e-mailed statement. Under the deal, investors would need to forgo 25 percent of face value and receive compensation in the form of warrants tied to the country’s economic performance. The Interfax news service reported the offer terms earlier Thursday.

Kiev is looking to cut its debt burden as part of an overhaul prescribed in a $17.5 billion International Monetary Fund loan sealed to revive the economy amid a conflict with pro-Russian separatists. City lawmakers imposed a moratorium on foreign-debt payments in October as talks with undisclosed creditors were said to be faltering, a person familiar with the negotiations said at the time.

Discussions in the past few months with creditors "did not result in agreement on the terms of a debt-restructuring operation," the city council said in the statement. "The City of Kiev and the Ministry of Finance believe that the last offer made to the ad-hoc committee represented a fair and reasonable compromise."

The municipality’s $300 million bond maturing July was little changed at 72 cents on the dollar at 6:12 p.m. in Kiev. The notes have traded 8-10 cents below sovereign debt, which will be swapped for new notes next week after receiving bondholder backing for the exchange on Oct. 14.

Of Ukraine’s $23 billion in foreign debt earmarked for restructuring in the country’s IMF-led bailout, investors have accepted new terms on $15 billion in sovereign notes and $2.8 billion in bonds from two of the nation’s three largest banks.

Russia, which bought a $3 billion Eurobond from former President Viktor Yanukovych before he was ousted in 2013, has declined to participate in the sovereign overhaul, preparing for a legal battle in English courts as it seeks full repayment of the debt.

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