Russian MinFin expects Ukraine USD 3 bln bond to be repaid on time

The Russian Finance Ministry received no restructuring offer for Ukraine’s USD 3 bln Eurobond that is owned by Russian National Welfare Fund, Minister Anton Siluanov told journalists on Sept. 23, as reported by Interfax. “We received no invitation,” Siluanov said. “Ukraine sent its offers to commercial creditors and included Russia. We expect the debt will be repaid.” Russia won’t discuss the restructuring conditions offered to private creditors since it provided an official loan, Siluanov stated.

A day before, the Ukrainian government sent invitations to the holders of all state and guaranteed Eurobonds (UKRAIN and UKRINF) to vote for their restructuring. The invitations included the USD 3 bln “Russian” Eurobond, the holder of which is invited to vote for the proposal in London at 11:10 a.m. on Oct. 14.

Siluanov also criticized the Ukrainian government for not being able to agree on restructuring conditions with its private creditors. “Conditions are changing even for private creditors,” he stated.

Alexander Paraschiy: Formally, we have to agree with Siluanov – nobody knew the exact conditions for the exchange of Ukrainian Eurobonds on Sept. 23, even though the bond holders’ meetings have been already scheduled. The documents that have been released by Ukraine yesterday contained no tangible restructuring offer.

Siluanov’s update on whether the Russian MinFin received an invitation to the bondholders meeting (published on the LSE website) is confusing in its own right. What is clear is that someone in Russia was addressed, but the Russian side wish it hadn’t received anything. It’s not the Russian MinFin that should have received the restructuring proposal, in our view, otherwise Russia would have a strong argument to interpret the USD 3 bln bond as “official debt”.

The only body that can confirm or decline the “official” status of the “Russian” debt is the IMF’s board of directors. We again expect the board will recognize it as non-official debt, meaning it can be restructured on par with other Ukrainian Eurobonds. Our expectations are based on the fact that the board has already implicitly recognized this debt as private in March 2015 when it approved Ukraine’s debt operation, which included the restructuring of the “Russian” bond. Now the IMF board members would have to be offered very strong arguments to change their positions. Any news from the IMF board on the status of the “Russian” bond will be critical for the completion of Ukraine’s debt operation.