Home > News > World
Friday June 20, 2014 MYT 4:10:02 AM
Friday June 20, 2014 MYT 4:10:58 AM
by jason lange
WASHINGTON (Reuters) - Ukraine is holding "preliminary" talks with creditors on a possible restructuring of its foreign currency debts, an official from an international finance association said on Thursday following recent meetings with Ukrainian officials.
The discussions underscore the severity of Ukraine's financial woes even after receiving $27 billion (15.8 billion pounds) in loans from the International Monetary Fund and nations including the United States. The loans are aimed at propping up Ukraine as it reforms its economy and struggles with an armed rebellion.
Lubomir Mitov, an economist with the Institute of International Finance who recently visited Ukraine, said it was too soon to say whether the country would need to change the terms of its debt. He said Ukrainian officials stressed they would avoid forcing any so-called haircuts on bondholders.
"The Ukrainian authorities made very clear to us that they would consider this only as a really, truly voluntary operation agreed by the bondholders," Mitov told journalists by phone. "A voluntary exchange or maturity extension could be one of the sources for financing."
"We know they're having some preliminary discussions between the authorities and bondholders, but they're still very preliminary," Mitov said.
The IIF is a financial industry lobby group that represents many of the world's biggest banks. It took the lead representing bondholders in discussions over restructuring Greek debt.
Ukraine's economy is under severe pressure as the country struggles with what Russian President Vladimir Putin has described as a civil war. Ukrainian President Petro Poroshenko, who took office on June 7, is pushing a peace plan to end the rebellion in eastern Ukraine, where pro-Russian militants are fighting for secession from the country.
Russia cut off natural gas supplies to Ukraine this week in a dispute over $1.95 billion in unpaid bills and failure to agree on the price of future gas deliveries.
Mitov said Ukraine is already in a deep recession that could shrink its gross domestic product, a measure of total economic output, by from 8 percent to 10 percent.
Still, he said Ukraine's finances will not be poor enough to necessitate a debt restructuring deal until at least next year. And even then, Kiev might not need a restructuring if it is able to return to capital markets to raise money, Mitov said.
"Nothing is decided yet," he said.
For now, Ukraine is relying on the billions of dollars in official funding from institutions and countries to help pay its debts, including those owed to Russia.
An IMF official reaffirmed the Fund's view that Ukraine is unlikely to require a debt restructuring.
The price of Ukraine's 2017 dollar bond fell sharply following Mitov's comments, according to Reuters data. "The mention of 'restructuring' is causing people to reduce exposure," said Tim Ash at Standard Bank in a client note.
(Reporting by Jason Lange in Washington; additional reporting by Carolyn Cohn in London and Anna Yukhananov in Washington; Editing by G Crosse, Andrea Ricci and Eric Walsh)
What happens if Greeks vote 'Yes', what happens if it's a 'No'
German finance minister says Greeks to decide whether to keep euro
Report on past Iran nuclear work could be ready by year end - IAEA
Austria finance minister says Europe can easily cope economically with Grexit
Celebrate Raya in style with GEMFIVE
The 3 unexpected life events that leave us in debt
Francis Yeoh donates RM4.2mil to struggling Rome opera
Boom to start Tour despite low cortisol levels
Ooh! What fun outfits for Raya
Copyright © 1995-2015 Star Media Group Berhad (ROC 10894D)(Formerly known as Star Publications (Malaysia) Berhad)