Ukraine Finance Minister plans to meet with creditors on Thursday

The Finance Ministry of Ukraine sent a revised proposal on restructuring of sovereign and guaranteed debt to the ad-hoc creditors’ committee on August 4, according to the ministry’s press release. This week will be decisive for talks with creditors, according to the release, “given the legal consideration of the timely implementation of the proposal.” To confirm the importance of soon solution, Finance Minister Natalie Jaresko twitted the same day that she had offered creditors to meet on Thursday in London “to discuss the proposal and agree on a solution”.

In an updated memorandum with the IMF, the Ukrainian government revealed its aim to complete the debt operation “by late September”. In the previous letter of intent, the government was expecting to complete restructuring by the time of the first review of the IMF program (which was scheduled for mid-June only took place in late July). Naturally, the ultimate deadline for completion of the debt operation is September 23, when sovereign Eurobond worth USD 500 mln is due.

The debt operation process began on March 13 that involves USD 23 bln in sovereign and quasi-sovereign debt. Of that amount, Ukraine managed to restructure USD 2.8 bln in Eurobonds of the state-run banks Ukreximbank and Oschadbank.

Alexander Paraschiy: Based on the updated memorandum with the IMF, Ukraine is still committed to reduce its debt-to-GDP ratio to 71% by 2020, which means it is still aiming to decrease the face value of the debt under restrcuring by 40%. We doubt that the creditors’ committee would accept such an amount of a haircut. This, as well as time constraints that the government faces, increases the risk that by the end of this week Ukraine will propose its most powerful argument in talks with creditors, namely, the moratorium on debt repayment.