Foreign bondholders intend to strike a deal with Ukraine to resume government debt payments, which were suspended two years ago, The Wall Street Journal reports. The U.S. and its allies are concerned that taxpayer money earmarked to help Kiev will end up with creditors.
Two years ago, borrowers granted Ukraine a credit holiday, expecting a quick end to the conflict, but their patience is running out, The Wall Street Journal quoted informed sources as saying. The foreign creditors plan to pressure Kiev, which just received about $60bn in U.S. aid, to start receiving interest again next year.
The group of bondholders, including BlackRock and Pimco, account for about a fifth of Ukraine’s $20bn of outstanding Eurobonds.The companies recently set up a committee and hired lawyers to negotiate with Kiev, intending to strike a deal to resume payments in exchange for writing off a large share of the outstanding debt. They plan to receive up to $500 million in annual interest. Kiev’s advisers plan to involve authorities from the US and other countries in the discussions.
Meanwhile, Washington and its allies are concerned that if Ukraine resumes state debt payments in any format, taxpayers’ money will end up in the hands of bondholders. Those countries have given Ukraine a debt holiday until 2027 on about $4bn of its own loans and fear Kiev will start paying back interest to bondholders first.
If the deal falls through, Ukraine could default in August, when the creditors’ debt holidays end. That would spoil its reputation among investors and hamper opportunities for additional borrowing.
