Ukraine’s govt. nears restructuring deal with creditors: report

Ukraine’s govt. nears restructuring deal with creditors: report

PanARMENIAN.Net - Ukraine’s government is nearing a restructuring deal with its creditors that would call for a 20% reduction in the value of the country’s bonds, marking a possible breakthrough in negotiations that have been deadlocked for months, the Wall Street Journal reported, citing people familiar with the matter.

Since March, the Ukrainian government has been locked in tense restructuring talks with a group of creditors who hold almost half the country’s outstanding debt. The two sides have yet to complete the details of how the 20% reduction in the value of the bonds—known in financial parlance as a “haircut”—will be implemented, but a deal could come as early as this week, the people familiar with the matter said.

Private investors hold about $19 billion of Ukrainian debt. The emergence of more clarity about the likely size of the haircut may signal a turning point after months of talks between the government, advised by Lazard, and a committee of bondholders, advised by Blackstone Group.

Still, according to the Journal, people familiar with the talks say the deal hasn’t been completed and could still fall apart.

“There is no agreement yet, negotiations are still going on to meet the IMF targets,” Ukraine’s Finance Ministry said in a statement. “The government of Ukraine has taken no decision and all options remain on the table.”

A 20% reduction would fall in the middle of the requests made by the two sides at the outset of the talks.

The investors’ committee, which includes Ukraine’s largest bondholder, Franklin Templeton Investments, initially argued that the Ukrainian government should repay the value of the bonds in full and deemed any haircut unnecessary.

Ukraine, meanwhile, said bondholders should take a 40% haircut. The country’s finance minister, Natalie Jaresko, threatened to suspend debt repayments if the committee refused to agree to the terms.

The International Monetary Fund, which is overseeing a multibillion-dollar bailout of Kiev’s beleaguered finances, has required that the Ukrainian government reach a cost saving agreement with its creditors.

Financial advisers for the two sides are running out of time to reach a deal before Ukraine must make a $500 million debt repayment on Sept 23.

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