Ukraine awaits creditor response to its new restructuring offer

Макроэкономика 28.07.2015 Ukraine has submitted new proposals to its creditors as part of a debt operation to restructure its sovereign Eurobonds and is now awaiting their response, the Reuters news agency reported on July 27, citing Finance Minister Natalie Jaresko. Ukrainian PM Arseniy Yatsenyuk called this offer “market-oriented” and “fair," according to a Bloomberg report. No other details of the offer have been disclosed. Jaresko said she is expecting quick feedback from creditors and new negotiations with them already this week. The last time Ukraine representatives met with the representatives of the ad hoc creditors committee was on July 15, when they revealed their intention to meet again during the week of July 20 but failed to do so. Meanwhile, the IMF executive board might decide to release USD 1.7 bln as a second loan tranche by the end of this week, but this appointment might be subject to some progress in Ukraine’s debt restructuring talks with private creditors, as an IMF official hinted last week. Alexander Paraschiy: The new offer of Ukrainian government, no doubt, is sweeter than the previous one, otherwise the government wouldn’t expect a prompt reaction from the creditors. Recall, MinFin and the creditors were not able to find common ground on debt restructuring over the last four months due to resistance on both sides. The fact that we did not hear any public reaction from debt holders (who used to criticize what they deemed as unconstructive proposals earlier) means that Ukraine’s latest offer is indeed progress towards narrowing the gaps between the positions of the two parties. We do not expect a fast solution to the debt operation process, but we still expect a deal by the end of this summer. We continue to expect the ultimate deal will consist of a tiny haircut, some decrease in bond coupon rates and a solid extension of bond maturity. In the worst case (which not very probable at this stage), we model that creditors and MinFin reach no progress this week, and this will trigger postponement of IMF’s board meeting to approve a new loan tranche for Ukraine. In such case, Ukraine will switch on its ultimate argument – debt moratorium – as soon as the next week.