A second individual with knowledge of the negotiations said only that “talks will continue” at some level Friday.
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The creditors’ committee, representing the four major holders of bonds worth $8.9 billion, in turn argued that without writing off the principal Ukraine will be able to meet the IMF’s required parameters of debt burden by offering long-term deferral of payments.
“Talks are ongoing”, they said in the two-line statement, without elaborating.
Two people close to the discussions told AFP that no deal was reached Wednesday when Ukrainian Finance Minister Natalie Jaresko met top debt representatives of the Franklin Templeton investment giant in San Francisco.
The eastern European nation warned on Friday that pro- Russian rebels shelled the army more actively than at any time in the past six months and may be planning a fresh offensive.
Private creditors will therefore have to accept a “haircut” of 40 percent of the face value of the debt, later repayments and lower interest payments, Kiev insists. The two sides regularly accuse each other of violating the cease-fire agreement.
“Very likely the talks will go on throughout the summer and the critical point in time will be the maturity of the September 2015 bond”, said Michael Ganske, head of emerging markets at asset management firm Rogge Global Partners, who has been following the talks closely.
Creditors, apart from Russian Federation, have proposed to allow Ukraine a 5 percent writedown of the debt, although the reduction is contingent on the country’s economic performance.
Kiev has made clear it will not make the latter payment, saying its IMF-led bailout hinges on plugging a $15 billion funding gap via debt relief. The economy shrank 14.7 percent in the second quarter from a year earlier and is poised for the worst contraction in Europe, the Middle East and Africa this year.
The creditors have reportedly offered a 5 percent haircut. It’s still up 2 cents for the week in anticipation that any agreement may contain favorable terms for bondholders.
Uncertainty over the restructuring process and a flare-up in fighting in eastern Ukraine have weighed on the country’s dollar-bonds, Ganske said.
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“Bondholders and the government could have agreed in principle on some baseline restructuring scenarios, but it usually takes time to study and compare proposals from both sides in detail”, Khramov, who expects a final deal that involves a 20 percent writedown, said by phone.
