Ukraine expects Eurobond restructuring to include partial debt write-off - finance minister

MOSCOW. June 7 (Interfax) - The Ukrainian Finance Ministry is continuing negotiations with Eurobond holders on restructuring payments, including partial debt write-off, and these negotiations will become public soon, Finance Minister Sergei Marchenko said.

"We're currently in restructuring negotiations with creditors, and this envisions partial debt write-off, among other things. Therefore, stay tuned," Ukrainian media quoted Marchenko as saying at a government Q&A session at the Verkhovna Rada on Friday.

"These negotiations will become public soon, and we'll be able to talk about them separately," Marchenko said while taking questions from the audience.

On August 10, 2022, Ukraine received consent from the holders of 13 of its Eurobond issues worth an equivalent of $22.6 billion and two other Eurobond issues under state guarantees for around $1.5 billion to have interest and principal payments deferred for 24 months. That restructuring agreement did not envision debt write-off.

The market has been expecting a proposal from the Ukrainian Finance Ministry on a new restructuring of commercial Eurobonds debt worth $20 billion since mid-spring 2024. Bondholders have already put together a special committee ahead of the talks. The Wall Street Journal reported in early May that a group of bondholders, including BlackRock BLK and Pimco, were planning to pressure Ukraine into resuming interest payments on its debt as early as next year in exchange for writing off a significant portion of the country's outstanding debt.

Ahead of the International Monetary Fund's (IMF) approval of a new four-year Extended Fund Facility for Ukraine (EFF) worth $15.6 billion at the end of March 2023, the group of Ukraine's formal creditors (the Paris Club) provided financial guarantees for the program following a meeting with IMF and World Bank representatives. This includes further standstill in Ukraine's payment of debts to the group members throughout the EFF period (2023-2027). The standstill is conditioned on similar actions of Ukraine's private foreign creditors, mostly Eurobond holders.

On March 24, 2023, the Ukrainian Finance Ministry said that the Ukrainian government pledged to take a number of measures during the program to manage the sovereign debt and achieve a number of objectives, including restoring debt sustainability, maintaining liquidity, reducing the financing gap, and providing the necessary conditions for the commercial sector to join post-crisis recovery efforts.

"The Ukrainian authorities will explore a number of alternative scenarios to ensure the debt payment and maximize the efficiency and success of the process, while being aware of the goal of the soonest restoration of Ukraine's access to the market. The Ukrainian government has hired financial and legal consultants to support the process," the ministry said in a statement at the time.

The ministry said it was expecting to begin talks with holders of $20 billion in Eurobonds on a new rescheduling at the beginning of 2024, so that the talks could be finalized by mid-2024.

The IMF said recently that Ukraine's public debt needed "deep treatments." While the IMF documents do not say directly that partial debt write-off is desirable, it has insisted that Ukraine should reduce public debt to 82% of GDP by 2028 and to 65% of GDP in 2033. Additional restructuring targets, besides reducing debt to 82% of GDP by 2028, include lowering the cost of servicing debt on external obligations to 1%-1.8% of GDP.