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10 Oct, 2023 09:14

Ukraine looking for more debt deals – Reuters

Bondholders agreed last year to freeze payments until 2024, but Kiev wants to “tap markets early,” the news agency says
Ukraine looking for more debt deals – Reuters

Kiev is negotiating with foreign lenders regarding the restructuring of its debt and is looking for ways to borrow more money, Reuters has reported. It follows a decision by the US Congress to omit additional aid for Ukraine from its latest spending bill.

Ukraine owes some $20 billion to bondholders, who agreed in August 2022 to freeze payments for two years. 

However, the government’s commissioner for public debt, Yury Butsa, has been informally contacting creditors to discuss a new postponement, the news agency said on Monday, citing three sources familiar with the matter.

Formal talks are scheduled to start early next year, but Kiev wants “to tap markets early,” one of the sources explained.

Overhauling the country’s debt is part of the terms of a $15.6 billion loan approved by the International Monetary Fund (IMF) in April.

According to Reuters, Ukraine wants to issue new bonds to existing holders as part of a proposed restructuring. The lenders will likely require some form of “credit enhancement” – collateral or debt guarantees from Ukraine’s foreign sponsors – one of the sources said.

Last year’s debt relief covered around 75% of Ukrainian bonds and was designed to prevent a default. Prime Minister Dmitry Shmygal said at the time that Kiev had saved almost $6 billion in payments thanks to the scheme.

Major bilateral creditors agreed in March to extend the suspension of Ukrainian debt service to 2027.

BlackRock, one of the world’s largest asset managers, is among the biggest private creditors of Ukraine. It also advises the country’s government on how to “attract private and public capital for implementing large-scale business projects,” according to the office of President Vladimir Zelensky.

Kiev’s efforts to reduce debt payments predate the outbreak of open hostilities with Russia last year. In 2015, a year after a Western-backed armed coup in the capital toppled the Ukrainian government, it restructured some $15 billion in of its bond debt, shortly after receiving a $40 billion bailout package arranged by the IMF.

Ukraine has refused to pay the $3 billion in bonds it owed to Russia, which were purchased in late 2013, claiming that the government of then-president Viktor Yanukovich was forced to issue it by Moscow. A legal battle over the debt, which has since accumulated interest leaving the total amount owed at $4.5 billion, is ongoing in the UK, since the bonds were issued under English law.

Russian MP Vyacheslav Volodin, the chairman of the State Duma, described Ukraine as a bankrupt nation last year, citing its dependence on aid and credit.

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