Ukraine's PM rejects Kremlin debt restructuring offer

By bne IntelliNews November 20, 2015

Ukrainian Prime Minister Arseny Yatsenyuk has rejected Russia's offer to restructure its $3bn Ukrainian Eurobond repayment terms, saying that Russia should accept the same terms offered to commercial bondholders.

Ukraine will default on the debt due on December 20 if Russia does not agree to a 20% reduction on the face value of the loan and a four-year extension of maturity, as offered to private sector creditors, Yatsenyuk said in an interview on December 19 on Ukrainian TV.

"I have stated [to Russia]: You aren't getting any different terms from other creditors," Yatsenyuk said, according to the RIA Novosti Ukraine news agency.

Yatsenyuk's words underline Kyiv's adamancy not to repay the $3bn debt to Russia in the immediate future, even if it means Ukraine defaults.

Kremlin aide Yury Ushakov claimed on November 20 that the initial feedback from the IMF to the Russian proposal had been positive. "The first response followed negotiations held by our president with IMF chief Christine Lagarde and certain foreign partners. The first response was positive. Everyone noted this initiative requires further examination by experts and we hope this will be done promptly," Ushakov said, as quoted by newswires.

President Vladimir Putin unexpectedly offered on November 16 that Ukraine could pay Russia $1bn each year 2016-2018, easing Moscow's previous condition that Ukraine repay the loan in full and on time. He also requested that the US, EU or IMF guarantee the loan repayment. Speaking on the sidelines of the G20 summit in Turkey's Antalya, Putin said "we have offered better conditions than the International Monetary Fund was asking of us," adding that the IMF had originally requested Russia only to delay repayment until 2016.

Putin said he had talked about Ukraine's debt repayment schedule during the G20 summit with Lagarde and US President Barack Obama. Russia provided the $3bn to Kyiv in late 2013 as part of a bailout of the administration of ousted former president Viktor Yanukovych, intended to dissuade him from signing an association agreement with the EU.

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