Ukraine has reached ‘win-win’ debt deal with creditor group

Ukraine has reached a crucial deal with its global bondholders that will help prop up its government finances and keep the struggling country from defaulting on its debt.

Under the deal, Ukraine’s repayments on its bonds will depend on how quickly the economy, battered by a separatist war in the east, grows.

“The deal agrees a 20 percent haircut on Ukraine’s stock of sovereign and sovereign guaranteed debt, having immediate debt relief totalling approximately $3.6 billion”, the finance ministry said in a statement.

Ukraine’s finance minister Natalie Jaresko urged the giant neighbour, which annexed part of the Crimea region a year ago – to accept the conditions.

The painful talks last for five months and saw the global Monetary Fund and the United Sates put enormous pressure on the bondholders to accept short-term losses in return for preventing Ukraine’s pro-Western leaders from being forced into resuming their reliance on Russian Federation. It’s the best way to depoliticise this. We’re all now moving forward without putting the value of the bonds at any further risk, she said.

Ukraine’s economy has been decimated by its conflict with Vladimir Putin’s Russian Federation.

Ukraine will temporarily suspend payments on that bond and a €600 million note due in October, the Finance Ministry said in today’s statement. An issue maturing at the end of September, which is also subject to restructuring, rose 4.3 cents to also trade at 64 cents.