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Fitch Declares Ukraine In Default After Missed Eurobond Payment
The Fitch ratings agency has declared Ukraine in partial default and downgraded the cash-strapped country after it failed to make payment on bonds it has been trying to renegotiate with creditors.
Fitch declared the partial default on $500 million in eurobond obligations on October 6 after Ukraine did not make payment following a grace period. It then downgraded the country's main credit rating to "restricted default."
Ukraine has been struggling with its debts since entering a deep economic recession after war broke out with pro-Russian insurgents in its eastern industrial heartland early last year.
Ukraine struck a deal in August to restructure much of its debt, but a small group of private lenders torpedoed the agreement, leading Kyiv to launch an exchange offer.
Fitch said the "distressed debt exchange" for $18 billion in eurobonds is designed to avoid default and will harm creditors.
Rival ratings agency Standard & Poor's similarly declared Ukraine in selective default last month, saying Kyiv's offer to creditors would include a 20 percent "haircut" in the money they are owed.
Fitch said it expects the debt exchange to be successful and it will upgrade Ukraine's credit rating shortly afterward.
Based on reporting by AFP and International Business Times
INTERVIEW-Ukraine couldn't get a better restructuring deal-FinMin
By Daniel Bases
NEW YORK, Oct 6 (Reuters) -- Ten months into her stewardship of Ukraine's shattered economy, Finance Minister Natalia Jaresko on Tuesday brushed aside the idea that the "win-win" terms of the country's sovereign debt restructuring will ultimately fail to fix its finances.
The deal's principal write-off and the repayment extensions were far less than predicted, raising concerns that Ukraine could be back to the negotiating table much like Greece after its 2012 restructuring proved inadequate.
Creditors will cast their votes on Oct. 14 on the deal that meets International Monetary Fund criteria to unlock a $40 billion financing package.
"I do not believe we could have done a better deal," Jaresko said in an interview at the end of a day meeting with creditors after arriving in the middle of the night from creditor meetings in London.
All of the IMF's criteria were met and it solved Ukraine's liquidity and solvency problems, she said.
Ukrainian sovereign debt has rallied since major creditors agreed to the terms in September, although a question mark hangs over the $3 billion debt held by Russia that matures in December. Moscow is demanding full payment.
Fighting with pro-Russian separatists in its east has drained Ukraine's finances.
Ukraine's four major creditors, Franklin Templeton, BTG Pactual, TCW Investment Management and T.Rowe Price, agreed to a 20 percent cut in principal owed, an extension of maturities and a so-called Value Recovery Instrument (VRI) that pays out based upon economic growth.
The VRI is a symbol of the deal's strength, she said.
"If the VRI is in place and we are making payments under the VRI it means the real economy is growing at more than 3 percent of real GDP (gross domestic product) per year," she said.
Jaresko forecasts economic contraction of 11-12 percent this year but 2 percent growth in 2016, 3 percent growth in 2017.
The IMF required $15.3 billion in savings, a public debt to GDP ratio under 71 percent by 2020, and gross budgetary financing needs averaging 10 percent of GDP in the 2019-2025 period.
RUSSIA ON THE SIDELINES
Jaresko meets Russian Finance Minister Anton Siluanov in Lima, Peru this week on the sidelines of the IMF/World Bank meetings. They have spoken just once, in January, to discuss the debt.
"I am hopefully going to be able to outline for him where we are in the process, answer any questions he may have on the process, encourage him to participate in the process," Jaresko said.
Jaresko said the issue won't be settled in Lima, nor is it time to discuss alternatives such as a bilateral framework within the Paris Club of creditor nations.
If Russia refuses it will be treated like any holdout, Jaresko said. She was confident the IMF would continue its loan program despite a rule forbidding lending to a nation in arrears.
"Assuming Ukraine is fully in line with the IMF program, I am confident that we will be able to find a solution to the so-called Russian bond, even if the Russian's choose not to participate in the restructuring," Jaresko said.