Ukraine’s biggest creditors have submitted a new debt restructuring offer to Kiev that proposes a 5% writedown on the bonds’ principal, according to a source, softening their stance of outright rejecting a so-called ‘haircut’, Reuters reported.
Negotiations to restructure US$23bn of debt have dragged on for more than four months because of the disagreement over writing down the principal of the bonds.
Earlier in the week, a group of Ukraine’s biggest creditors, led by US asset manager Franklin Templeton, had sent a fresh proposal to Kiev, according to the source.
“The proposal contained a 5% ‘haircut’ with conditions attached to it,” the source said, declining to elaborate on what the conditions were.
A second source confirmed a conditional proposal had been made but declined to give any further information.
“Following detailed negotiations, the committee has made a conditional proposal to forgive (subject to a number of preconditions and other detailed terms) a small portion of Ukraine’s debt,” said the second source familiar with the talks.
“As long-term investors in Ukraine, the committee has led efforts to ensure a rapid, mutually acceptable and sustainable debt restructuring, while also retaining the country’s vital access to capital markets.”
Including a haircut marks a u-turn for creditors. But the 5% writedown is still some way away from the 40 percent Finance Minister Natalia Yaresko suggested was necessary to fulfill the conditions of a bailout programme led by the International Monetary Fund.
“It’s a positive step in terms of moving the process forward,” said Jakob Christensen, senior economist at Exotix. “Clearly the creditors have moved forward.
“But yes, it will not be enough. They would have to move further and it will be a give and take from here.”
On Monday, Yaresko said Kiev had made a new proposal to its creditors and was awaiting their response, though she declined to give any details of Kiev’s latest proposal.
The group of creditors, which includes T Rowe Price, BTG Pactual and TCW, holds US$8.9bn, almost half the bonds targeted for a haircut.
Eurobonds have risen steadily over the past weeks on expectations that an agreement will be reached.
The 2017 issue rose 0.875 cents in the dollar to trade at 56.750 cents in the dollar – its highest level in more than five months. The 2022 issue added one cent to change hands at 56.250 cents .
Bankers involved in the negotiations from TCW and BCG declined to comment on the status of the talks.
