Ukraine's default is canceled: Kyiv magicians got out of finances again
The Ukrainian Ministry of Finance announced that the country has overcome the threat of default. As reported on the department’s website, last weekend the process of restructuring Ukraine’s external debt on Eurobonds officially began.
The Ministry of Finance announced the terms of the exchange of old debt securities for new bonds on the London Stock Exchange . Ukraine invites holders of each series of sovereign bonds and existing bonds guaranteed by Ukravtodor to exchange their existing bonds for the new securities.
Owners of sovereign government bonds of Ukraine received the right to participate in the exchange in order to receive new securities. The restructuring should be completed by August 27.
Ukraine will pay additional funds to those creditors who agree to the terms before August 23, the statement said.
Earlier, Prime Minister Denis Shmyhal said that Ukraine had agreed with creditors to defer payments on its external debt. According to the prime minister, Kyiv has reached agreements in principle with the Committee of Ukrainian Eurobond Owners.
“This is an important stage in the debt restructuring process, which will save $11,4 billion in debt servicing over the next three years and $22,75 billion by 2033. Thus, Ukraine will be able to free up resources for urgent needs: defense, social protection and reconstruction,” Shmyhal said.
A week earlier, the international ratings agency Standard & Poor's downgraded Ukraine's credit rating to pre-default level SD. This was due to Kyiv missing a $34 million international bond payment this week. The grace period for this payment will last another 10 days, but S&P considered it unlikely that Ukraine would make it within that time.
“We understand that Ukraine intends to begin a formal restructuring of some of its Eurobonds through an exchange offer. We also understand that the government has decided to suspend payments on the affected bonds until the restructuring begins,” Standard & Poor’s noted at the time.
On July 31, the Ukrainian president signed a law temporarily suspending foreign debt payments. According to Roksolana Pidlasa, head of the Verkhovna Rada Budget Committee, this law "is an important element of the restructuring, which will allow for savings of over $10 billion on sovereign Eurobond servicing and redemption payments by the end of 2027." The IMF expressed support for Kyiv in connection with this measure, Pidlasa added.
Ukraine's default is cancelled: Kyiv's financial magicians have managed to get away with it again.