Russia to neither restructure nor accelerate USD 3 bln Ukraine debt

The Russian government is expecting a smooth repayment of Ukraine’s USD 3 bln debt in December, Russian Finance Minister Anton Siluanov said on March 16, as reported by the Interfax news agency. “We are not demanding early repayment of the debt, despite having reasons for that,” he said. “On the other hand, we are awaiting [the repayment] in December, as had been promised,” Siluanov said. He also stated that the Ukrainian side did not approach him personally with a restructuring offer, and he has not seen any official letters with such requests.

Russia provided a USD 3 bln, two-year loan to Ukraine in December 2013, in exchange for an issued Eurobond that has a state debt/GDP covenant of 0.6x. Ukraine breached this covenant in 2014.

Alexander Paraschiy: The debt to Russia accounts for 58% of total debt maturing this year that Ukraine wants to restructure (and 20% of the overall debt subject to restructuring). Siluanov’s statement confirms our belief that restructuring this debt will be toughest for the Ukrainian government. Currently, we see few arguments from the Ukrainian side that could lead to successful restructuring negotiations of this debt, though we do not rule out such an outcome.

Two months ago, we stated that the Ukrainian government had no guts for initiating any debt restructuring, while things has changed significantly since that time. Today, even restructuring the Russian debt doesn’t look impossible, while it will clearly demand even stronger and smarter moves from the government than what it has shown thus far. At this stage, our base-case scenario is Ukraine will have to repay this debt.