Ukraine Debt Talks Reach Boiling Point

Claiming that the creditor committee refused “despite numerous requests” to reveal its membership, the finance ministry stressed that it and debtholders needed by June “to agree on a sustainable debt level and debt service objectives meeting the targets” of an International Monetary Fund programme granted earlier this year.

“The ministry is committed to transparency, responsiveness and good faith negotiations and expects the creditors’ committee to do the same,” Kiev added.

The tough words come amid increasing market expectations that the restructuring talks are likely to stretch on through the summer as Ukraine continues — in the face of creditor disapproval — to demand a haircut, cuts to the coupon and maturity extensions to free up $15bn over the next four years.

Reaching that target is part of a broader $40bn assistance program that includes a $17.5bn IMF loan and some $7.5bn in bilateral assistance.

Negotiations between international investors and the government appear to have reached deadlock, with a group of the country’s largest investors declaring earlier on Tuesday that they were “ready and willing to support a prudent debt restructuring with Ukraine” but had had “no substantive engagement” from the government.

Ukraine in its Tuesday statement said finance minister Natalie Jaresko “proposed last week to speak directly with the one known committee member to accelerate and focus negotiations but was told that they were unavailable to talk to her”.

The ministry added:

“Even though Ukraine and the IMF have repeatedly said that the three targets for the debt operation (liquidity, sustainability and payment capacity) have to be met, the committee in its public statements focuses exclusively on the liquidity aspect, and refuses to acknowledge the debt sustainability objective.”

The committee of creditors declined to comment on the finance ministry statement.

International holders of Ukrainian debt, which include US investor Franklin Templeton, say there is little point in setting final terms for a debt restructuring while the country is fighting a war and its economic situation is in a state of flux. They disagree with Kiev’s insistence that the only way for Ukrainian debt to become sustainable is through a haircut for investors.

Bondholders are promoting an alternative solution that would involve granting an extension to upcoming debt payments.

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