Russia rules out restructuring USD 3 bln bond due December

The Russian government’s position on restructuring USD 3 bln in Ukrainian Eurobonds, owned by a Russian state fund, has not changed, Deputy Finance Minister Sergei Storchak told journalists on Sept. 15, as reported by Interfax. The Russian side has ruled out any possibility of negotiating the restructuring of this debt, which it expects will be paid on time, he said. The IMF position that called upon private creditors to agree on the restructuring is not directed at “sovereign creditors,” he said.

Recall, Ukraine included in its debt operation a USD 3 bln, two-year Eurobond that was bought by the Russian National Welfare Fund in December 2013. The Ukrainian side insists that the holders of this bond should be treated on par with the holders of all other Eurobonds. The Russian side, in its turn, insists that this bond is in fact official debt, which cannot be restructured for a country that wants to cooperate with the IMF. The IMF has yet to define the status of these bonds, as its head Christine Lagarde stated last week.

Alexander Paraschiy: Implicitly, the IMF blessed the inclusion of the USD 3 bln “Russian” Eurobond in Ukraine’s debt operation. In particular, the IMF memorandum signed in March 2015 calls for USD 5.2 bln in savings for Ukrainian international reserves from the 2015 debt operation (i.e. from the maturity extension of all sovereign Eurobonds and Eurobonds of state companies due in 2015). Without the “Russian” debt being postponed, this amount would only be USD 2.2 bln. Now that Ukraine has secured a debt operation with the majority of its Eurobond holders, after almost half a year of tough negotiations, it’s too late for the IMF to reconsider the status of the “Russian” bond, we believe. We continue to expect that the IMF will classify this debt as private, and Ukraine will not have to repay it in late December.