By Chiara Albanese and Nick Shchetko
Investors holding $10 billion of Ukrainian debt have joined
forces to develop a restructuring plan for the country's debt which
won't involve a reduction in the value of the bonds, according to
financial and legal advisers of the group.
"A detailed proposal is being developed by the committee that
provides Ukraine with the necessary financial liquidity support it
has requested...without any principal debt reductions," Blackstone
Group International Partners LLP and Weil, Gotshal and Manges LLP,
which are advising the bondholders, said on Thursday.
The committee includes U.S. asset manager Franklin Templeton
Investments, which with about $4 billion of the Ukrainian bonds at
the end of December is the largest private holder of the country's
debt.
The two advisers didn't respond to requests for further comment.
Ukraine's Ministry of Finance also didn't comment on the
bondholders' committee, which was formed at the government's
request.
Still, the proposal doesn't guarantee the creditors will be
fully repaid for the outstanding debt, according to Standard Bank
analyst Tim Ash. The proposal "does not mean that a deal will be
done on these terms, without a haircut," he said. "The approach
adopted by the Finance ministry over the state bank restructuring
process suggests a pragmatic approach," Mr. Ash said.
Earlier in April, Ukraine's finance minister Natalie Jaresko
said the debt restructuring may include extension of maturity and
lowering the coupon interest rate as well as nominal value of the
obligations. At the time, she said there were no negotiations on
the specifics under way.
The International Monetary Fund approved a $17.5 billion bailout
package for Ukraine in March, but the country will need to draw
into other international funding sources and restructure its debt
to address its total financing need, estimated at $40 billion.
Ukraine is aiming to save $15.3 billion from debt restructuring
with the implementation of a three-year cost-cutting plan agreed
with the IMF, including $5.2 billion this year. The country's
officials have also said they would seek to restructure a $3
billion Russian bailout bond maturing in December.
Kiev is also seeking to restructure some outstanding obligations
issued before February 2014, including sovereign external debt,
sovereign-guaranteed external debt and debt of state banks
Ukreximbank and Oschadbank, as well as the city of Kiev and the
state railway operator.
Talks with the country's creditors must conclude in May, before
the first IMF performance review under the bailout program. IMF
officials said this week that the fund had a "fair amount of
leeway" in judging the progress of restructuring talks, hinting at
less strict timing requirements.
Battered by the near-yearlong conflict in its industrial east,
Ukraine's economy is set to contract 7.5% this year, with inflation
hitting 30%, according to central bank estimates. The armed
conflict with pro-Russian rebels has taken more than 6,000 lives,
according to United Nations estimates, and left hundreds of
thousands displaced.
While the fighting with eastern separatists has decreased
significantly since a cease-fire was signed in February, both sides
warn of the threat of a re-escalation. Though if the Ukraine
conflict does remain contained, the government expects the economy
to resume growing in 2016.
Write to Chiara Albanese at chiara.albanese@wsj.com
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