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Ukraine Needs to Avoid Private Debt Default

by Oui Sun Jul 7th, 2024 at 04:44:30 PM EST

Will Ukraine Default on Its Debts? | Wilson. Enter - 3 July 2024 |

Starmer Urged to Block UA Debt Scavengers

You promised Russia 🇷🇺 would be defeated in two years ... 🥺

BlackRock and others form a group to try to pressure Ukraine to start repaying its debts

Campaigners are urging Britain's new Labour government to prevent Ukraine being sued in the UK courts if the country defaults on its debts to private creditors.

Debt Justice said a two-year suspension of Ukraine's debt payments was scheduled to expire on 1 August, and that action was needed to protect Kyiv from the possibility of legal action from its creditors.

Ukraine is in negotiations with bondholders and is seeking a debt writedown of 60% on the $24bn (£18.7bn) it owes to private creditors. Bondholders - which include big investment groups such as BlackRock, Pimco, Fidelity and AllianceBernstein - have said they are willing to take a 20% loss.

Ukraine's official bilateral creditors, including the UK, have agreed to continue suspending Kyiv's debt payments until 2027, but there has been no agreement to extend the arrangement with private creditors. The relief offered by private creditors is worth around 12% of Ukraine's annual national output (GDP).

Additional reading ...

End of the Year 2023 Ukraine | World Bank |

UK urged to protect Ukraine from legal action over private debt default | The Guardian |

Kyiv shouldn't have to fight `shameless bondholders' as repayment deadline nears, say campaigners

The group, which includes investment giants BlackRock and Pimco, granted Kiev a two-year debt holiday in 2022, gambling that the conflict with Russia would have concluded by now.

With no end to the fighting in sight, the lenders have now hired lawyers at Weil Gotshal & Manges and bankers from PJT Partners to meet with Ukrainian officials and strike a deal whereby Ukraine would resume making interest payments next year in exchange for having a significant chunk of its debt written off, anonymous sources told the Wall Street Journal.

The group holds around a fifth of Ukraine's $20 billion in outstanding Eurobonds, the newspaper reported. While this figure represents a fraction of Ukraine's total external debt of $161.5 billion, servicing the interest on these bonds would cost the country $500 million annually, the bondholders said.

Should the bondholders fail to strike a deal with Kiev by August, Ukraine could default. This would damage the country's credit rating and restrict its ability to borrow even more money in the future.

The legal cost of default: How creditor lawsuits are reshaping sovereign debt markets | July 2018 |

The EU is leading Ukraine into a sovereign debt crisis | Politico |

Brave and economically ravaged Ukraine needs a debt deal to win the coming peace -- and grants rather than loans.

European Council President Charles Michel, such aid shows that Brussels is "very committed to supporting Ukraine as much as we can."

As the war rages and pressure on Ukraine's economy mounts, basic economics -- and centuries of history -- paint a much less optimistic portrait of the real impact of Europe's financial support.

G7: Whether or not to maintain the suspension of Ukrainian debt payments | May 2024 |

Token exchange golden UA medals for some EU debt relief.

Recent history of Ukraine run by Western partners ...

IMF cash in bag, a debt moratorium may give Ukraine what it needs | Reuters - 11 March 2015 |

Right now Ukrainian bonds, with the exception of a $3 billion chunk held by Russia and a $1 billion U.S.-guaranteed issue, are trading at less than half their face value, a reflection of what creditors fear they will have to swallow as a writedown, or haircut, on their initial investments.

With total debt likely close to or over 100 percent of gross domestic product, reserves that can buy just a month's imports, a fragile ceasefire in the east of the country and a chunk of territory (Crimea) annexed by Russia, some players reckon a haircut of up to 70 percent is possible.


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