Ukraine and creditors are narrowing their gaps, Western media report
31 July 2015
The ad hoc creditors committee on Ukrainian state debt submitted a new proposal to the government that includes agreeing to a haircut, The Wall Street Journal reported on July 30, citing anonymous sources. This was confirmed by the Bloomberg news agency, whose anonymous source said the creditors’ offer includes a 5% principal haircut on the debt. In turn, Ukraine recently indicated it is also willing to settle for a less severe haircut to strike a deal, instead of its initial 40% proposal, WSJ reported, citing its sources.
Recall, Ukraine’s Finance Ministry initiated a debt restructuring process on March 13 that involves USD 23 bln in sovereign and quasi-sovereign debt. MinFin suggested that creditors form an ad hoc committee to start the negotiations. The first progress in the talks was only reported on July 2, when the parties released a joint statement on their wish to complete the talks ASAP. They made another joint statement on July 15, indicating “a further progress” and “a need to narrow the gaps” between their positions. Meanwhile, Ukraine’s state banks, whose Eurobonds of total par value of USD 2.7 bln were part of the debt operation, have nearly completed their debt restructuring.
Alexander Paraschiy: These reports make us confident that the IMF board will approve today the USD 1.7 bln second tranche to Ukraine under its EFF program. We believe that any message on the progress of debt negotiations (even from undisclosed sources) is what the IMF lacked during the last two weeks to comfortably agree on the new tranche.
At the same time, we found no surprise in the recent news leaks. To us, it was written between the lines in the July 15 joint statement that the creditors have agreed on some haircut. The reported committee’s offer, with a 5% haircut, is close to our expectations of a 5% to 10% haircut at the ultimate deal. We believe the next week will show how serious the parties are in their attempts to get closer to the ultimate solution on the debt operation.
