Ukraine creditor group releases names of three members after criticism
By Natasha Doff, Marton Eder and Lyubov Pronina, Bloomberg, May 18, 2015
A creditor group led by Franklin Templeton has disclosed the names of three other members after criticism from the Ukrainian government, as bondholders aimed to set a more constructive tone following a week of mutual recriminations.
The disclosure comes after Ukraine said on May 12 that refusal to reveal its membership showed a lack of transparency from the group that it also accused of declining an opportunity to meet Finance Minister Natalie Jaresko and not acting in good faith. Earlier the same day, bondholders called the lack of progress “disappointing” and said the government had failed to respond to a committee proposal submitted last month.
“It’s a concession by the group,” Per Hammarlund, the chief emerging-markets strategist at SEB AB in Stockholm, said by e-mail. “It’s a small step forward, but now the government will have to reciprocate. If they don’t, the process will stall, and further concessions by the group will be more difficult.”
Time is running out for both parties to reach an agreement as a June 15 International Monetary Fund deadline for the restructuring approaches. Failure to strike a deal puts the next tranche of a $17.5 billion IMF loan at risk for Ukraine as it struggles to keep the economy afloat following a yearlong conflict with pro-Russian separatists in the nation’s east.
Templeton, BTG Pactual Europe LLP, TCW Investment Management Co. and T. Rowe Price Associates Inc. own $8.9 billion of Ukrainian debt, the committee said in an e-mailed statement on Monday. They are in “regular contact” with other bondholders representing at least a further $1.1 billion, they said. The committee previously said that there were five members controlling $10 billion of Ukraine’s bonds.
“The committee is pleased that the Ministry of Finance of Ukraine wishes to accelerate discussions around a potential debt solution for Ukraine,” the group said in an e-mailed statement. The group “confirms that it welcomes the opportunity to engage constructively with the ministry”.
A spokesman for the Finance Ministry declined to comment when contacted by phone.
Jaresko ratcheted up pressure on the country’s creditors on Friday, warning that “all options are on the table” if there’s no progress in restructuring talks by next month’s deadline. Ukraine’s $2.6 billion of bonds due in July 2017 fell for a fifth day, by 0.13 cent to 46.47 cents on the dollar at 7:07 p.m. in Kiev.
The Finance Ministry also accused the creditor committee last week of refusing to acknowledge the debt-sustainability objectives of the restructuring and focusing only on liquidity. Last month’s proposal “meets the objectives of the ministry without any principal debt reductions, and would provide the country with a solid foundation for economic recovery,” the committee said today.
The creditor group believes that the proposal it has provided Ukraine meets all three IMF requirements, according to a person close to the negotiations who asked not to be identified. The targets include a goal to save $15.3 billion over four years, a reduction of the nation’s debt-to-gross domestic product ratio and a lowering of budget financing needs.
“There are now indications that the talks are making progress and may accelerate soon, suggesting that earlier signs of poor communication between the obligor and main creditor group were more likely the normal give and take during restructuring negotiations,” Richard Segal, the head of emerging-market strategy at Jefferies International Ltd. in London, said by e-mail.“A haircut of some form is virtually unavoidable.”
Jaresko: Debt restructuring talks more difficult than expected, UNIAN News, May 18, 2015
But Jaresko also ruled out the possibility that the negotiations might fail, and said that the national bankruptcy “was not an option.”
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