UK court suspends its ruling against Ukraine on USD 3 bln debt to Russia

The High Court of England decided to suspend its March 29 ruling which rejected all of Ukraine’s arguments in a dispute with Russia on USD 3 bln Eurobonds, Ukraine’s Finance Ministry reported on May 26. At the hearing the same day, the Ukrainian side applied for “further suspension of the judgment becoming executable” until the English Court of Appeal considers it, “which would not be before 2018,” the Finance Ministry reported. “Given the complexity of the issues involved, the Judge decided to reserve his judgment.”

The Russian state-owned fund holding the USD 3 bln Eurobond was Ukraine’s only major creditor that refused to take part in a 2015 debt restructuring. Kyiv’s debt operation resulted in the exchange of then-existing sovereign Eurobonds worth USD 15 bln into a series of new 7.75% Eurobonds maturing in September 2019-September 2027 and GDP warrants. The USD 3 bln Eurobond matured in December 2015, but the Ukrainian government paid nothing on them due to a debt repayment moratorium imposed in May 2015 and then extended in April 2016.

Alexander Paraschiy: The recent court decision implies that Ukraine won’t violate UK legislation (at least this year) by not paying anything on the USD 3 bln deb to the Russian side. The appeal looks more like an attempt to postpone the ultimate UK court decision in a commercial case against Ukraine for about a year (it does not look likely that the appeal will change anything). At the same time, we do not expect that Ukraine will repay this debt in the next 1-4 years, as non-repayment is a part of the commitment taken to the IMF and other Ukrainian Eurobonds holders. On top of that, repayment would violate Ukrainian legislation on moratorium, and it will be  very unpopular in Ukraine, which is suffering from the military and economic aggression of Russia.