Ukraine seeks mystery creditors as bond restructuring deadline looms

By bne IntelliNews June 9, 2015

bne IntelliNews -

 

Ukraine has sent out letters requesting holders of $23bn of sovereign Eurobonds to identify themselves, as the country battles a mid-June deadline to restructure its foreign public debt in order to receive further funding from the International Monetary Fund (IMF).

"The Ministry of Finance of Ukraine looks forward to working with the holders of its securities to achieve a consensual approach to the envisaged debt operation," reads the letter sent on June 4, as seen by bne IntelliNews.

On June 5, Ukraine's finance ministry failed to reach any agreement with the creditors' committee over restructuring. The committee is represented by US investment fund Franklin Templeton, holders of the largest swathe of Ukraine's Eurobonds, with other investors remaining unknown.

Ukrainian officials are hoping to receive more than $2bn from the IMF in June, having obtained an initial tranche of $5bn in March. Both sums are part of a planned $17.5bn aid package to be distributed over the course of four years, however the decision to disburse the second tranche in June rests partly Ukraine's negotiations with its bondholders.
Kyiv's dealings with Moscow over Russia's share of the bonds have particularly complicated the restructuring efforts in recent weeks.

Finance Minister Natalie Jaresko has said she regards the $3bn two-year Eurobonds issued to Russia in December 2013 under an abortive bailout operation as commercial and not official debt, since Russia had not identified itself as the owner of the bonds. Russia insists the bonds are official and says it expects their full redemption upon scheduled maturity in December 2015 as well as coupon payments due in June. The bonds are included in the list of Ukrainian bonds for which the finance ministry was still looking to identify an owner on June 4.

Earlier in response to Jaresko's remarks Russian Finance Minister Anton Siluanov told journalists Russia was the owner. On June 8, Siluanov's deputy also told media that Russia had now notified Euroclear that it was the owner of the bonds.

Euroclear handles settlements for Eurobond trading and featured in the June 4 letter from the Ukrainian finance ministry as one channel through which bondholders could identify themselves. In the letter, the ministry urged bondholders to submit the relevant identification documents "no later than 11 June, 2015".

In a strongly worded statement following an abortive telephone call on June 5 with the group of creditors led by Franklin Templeton, the ministry rejected their demands as unacceptable. "The committee’s proposal to offload their sovereign claims into the books of the National Bank of Ukraine is unacceptable as it assumes using the [bank's] reserves, in clear violation of Ukrainian law, and more generally in clear contradiction with Central Bank's best practices," the statement read.

"Just a week before the initial deadline to approve the results of the debt operation -which is mid-June, as had been agreed with the IMF - Ukraine and its creditors look to be far from finding common ground," Concorde Capital analyst Alexander Paraschiy commented.

Ukrainian Prime Minister Arseny Yatsenyuk and Jaresko visited the United States on June 8-9 to talk with IMF and US officials about progress on debt restructuring.

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