Monday, August 24, 2015

Ukraine creditors suggest 20% haircut in talks

Ukraine's creditors have suggested a 20 per cent haircut on billions of dollars of sovereign bonds as negotiations to restructure the war torn country's debt near an end.

The haircut is the latest deal on the table as the two sides attempt to meet the terms of the IMF's rescue plan for the country by reducing debt held by private creditors by $15.3bn over the next four years.

No deal has been signed but the proposal indicates that both sides are willing to meet half way in order to secure an agreement which could come as early as this week according to a person close to negotiations, reports Elaine Moore.

Two weeks ago representatives from Kiev flew to San Francisco, home city of Ukraine's largest creditor, Franklin Templeton, for meetings that the country said represented the last chance to avoid default. Kiev had been seeking a 40 per cent haircut from investors, who argue that the country's debt could be made sustainable through maturity extensions and without the need for any haircut.


However as fighting with pro-Russian separatists in Eastern Ukraine increases and the country's economic situation deteriorates international creditors have come under more pressure to accept a haircut on their holdings.

The haircut could form part of a larger deal that is likely to include maturity extensions, frozen coupon payments and a form of debt instrument that would link returns to the country's recovery, such as GDP-linked bonds.



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