Ukraine submits appeal against London court ruling on Russian debt

Ukraine’s Finance Ministry filed documents to initiate an appeal against a March 29 ruling of a London court that found no legitimate argument for Ukraine to not repay USD 3 bln in debt to a Russian state fund. According to MinFin press release of June 23, the necessary papers were filed with the English Court of Appeal the same day. “Ukraine is confident of its arguments on appeal,” the release said. The appellate hearing is preliminarily scheduled for the second half of January 2018.

Recall, a Russian state-controlled fund refused to take part in the restructuring of Ukrainian sovereign Eurobonds in fall 2015. The USD 3 bln bonds that the fund held (the “Russian debt”) matured in December 2015, though the Ukrainian government has yet to repay them, citing a moratorium imposed by the Ukrainian parliament.

Alexander Paraschiy: We do not share the “confidence” of the Finance Ministry in the future appeal, given that the London court has rejected all of Ukraine’s defense arguments in the case against the Russian fund, thus having considered the case as purely commercial. With its appeal, Ukraine will delay the U.K. court decision taking effect by an additional 1-1.5 years.

Regardless of the outcome, we do not see Ukraine paying this debt to Russia in the nearest years. In response to demands, the Finance Ministry will be referring to the IMF agreement that implicitly prohibits any repayments on the debt till the end of 2018. It will also refer to the restructuring deal with other Eurobond holders that prohibit favorable treatment of the Russian fund, as well as the moratorium on repayment of the “Russian debt” imposed by parliament.