Bondholders to push Ukraine to resume debt payments

Ukraine’s lenders said Kyiv could wait to pay them back after Russian troops stormed into the country two years ago.

Now, their patience is starting to run out, according to The Wall Street Journal.

A group of foreign bondholders including BlackRock BLK 0.91 per cent increase; green up pointing triangle and Pimco plans to press Ukraine to start paying interest on its debt again as soon as next year, according to people familiar with the matter. 

The group, which holds around a fifth of Ukraine’s $20 billion of outstanding Eurobonds, recently formed a committee and hired lawyers at Weil Gotshal & Manges and bankers from PJT Partners PJT 1.09 per cent increase; green up pointing triangle to negotiate on its behalf.

The group wants Kyiv, which is fresh off clinching roughly $60 billion in US aid, to strike a deal in which it would resume payments in exchange for forgiveness of a big chunk of the country’s outstanding debt. Some bondholders in the group have discussed the plans with senior officials in Kyiv.

A spokesman for the bondholder group said it “looks forward to engaging constructively to assist with Ukraine’s sovereign debt.”

Ukraine is preparing to start talks with the bondholders this month, and Kyiv’s advisers are working to get the US and other governments on board. 

That approval isn’t guaranteed. The US and its allies are concerned that taxpayers’ money will wind up in bondholders’ hands if Ukraine resumes any type of debt service. The countries agreed to give Ukraine a debt holiday on roughly $4 billion of their own loans, until 2027, and have voiced concerns that bondholders could start to be repaid ahead of them.

Without a deal, Ukraine could default after the bondholder-debt holiday ends in August, tarnishing its reputation with investors and complicating its ability to borrow more.

Officials from the International Monetary Fund and some members of the bondholder group met in April in Washington, D.C., where fund representatives indicated total debt relief from the private sector might need to be higher than the bond markets currently indicate. Ukraine’s bonds trade at between 25 and 35 cents on the dollar, according to AdvantageData, implying losses as high as $15 billion.