Wasting no time after the 10-day grace period expired on December 31, 2015, Russia’s Ministry of Finance announced that it had initiated proceedings against Ukraine for nonpayment of $3.075 billion that came due on December 20. In addition to simple nonpayment, the Russian side also has claims that Kyiv violated certain covenants and triggered at least one other event of default in the months and weeks leading up to the maturity date. Continue reading
Tag Archives: Sovereign debt
By now many of you have surely read about the deal reached by Ukraine and its Franklin Templeton-led group of creditors. In short, the parties agreed to (1) write off 20 percent of Ukraine’s debt, (2) extend repayment dates by four years, (3) increase the coupon payment to 7.75 percent, up from 7.2, and (4) issue the creditors a GDP-linked obligation that will pay out a percentage of annual economic growth above 4 percent after 2021. The agreement has been a long time coming and represents a compromise between the two sides’ earlier negotiating positions: as recently as last month, Ukraine insisted on a 40 percent debt write-off while the main creditors had begrudgingly admitted that they might be willing to stomach a 5% haircut to principal. (If you’re interested in the background of the debt dilemma that Ukraine has been wallowing in for the past year or so, check out FT Alphaville’s series of articles on the saga, penned by the exquisite Joseph Cotterill.)
On July 30th, it was reported that Ukraine’s largest group of private creditors had finally conceded that some haircut to the principal of their debt holdings may be required in any restructuring. According to Bloomberg, the Franklin Templeton-led group was only willing to contemplate a 5% write-down to their $7 billion investment. However, given that Kyiv needs to squeeze some $15 billion in savings from roughly $21 billion of debt, the offered haircut is likely to fall well short of what’s ultimately needed to put Ukraine back on a sustainable financial path.