H/t reader squodgy:
“It must be frightening having to continuously cough up endless sums to fund an economically, tactically & militarily bankrupt puppet Government who are up against a patriotic independence movement backed by a genius.”
– Rothschild Seeks to Advise Ukraine Bondholders in Debt Talks (Bloomberg, March 6, 2014):
Rothschild is seeking to advise Ukraine’s bondholders in restructuring talks with a government struggling to avert default after a year of fighting with rebels crippled its economy.
The company’s Paris-based sovereign advisory team has been in contact with creditors, Giovanni Salvetti, who handles central and eastern Europe and the Commonwealth of Independent States. Bondholders are bracing for harsh terms as the looming debt revamp drove the nation’s $2.6 billion of notes due in July 2017 below 50 cents to the dollar since mid-February.
Ukraine, on course to secure $17.5 billion of International Monetary Fund emergency aid this month, said in February it hired Lazard Ltd. and White & Case LLP to advise on the restructuring. The country will enter into consultations with bondholders once the IMF approves its aid agreement, Finance Minister Natalie Jaresko said Feb. 12.
“Everybody is just waiting for the government’s proposals on restructuring, expected by mid-March,” Salvetti said by e-mail on Friday. “The idea is to form a bondholders committee, but so far we are just exchanging views and establishing who wants to do what and establishing an agenda.”
The country has about $18 billion of international bonds outstanding, according to data compiled by Bloomberg News. It’s ability to service debt has been curtailed as the conflict between separatists in the country’s east and government forces in the 12 months since Russia annexed Crimea drained international reserves by almost two thirds to $5.62 billion.
The nation’s 2017 notes climbed 0.1 cent on the dollar to 45.46 cents by 2:14 p.m. in Kiev. The hryvnia strengthened 1.1 percent to 22.75 per dollar.
Salvetti said there were two opinions among creditors about setting up the committee: Those who want to wait and see what the government will say and those who want to set “some hard lines for the potential restructuring, like saying we’re looking for a proposal but be aware that we are not ready to accept X, Y, Z.”
Michael Ganske, who helps oversee $7 billion in emerging-market bonds and currencies at Rogge Global Partners Plc in London, including a small position in a Ukrainian dollar bond, said he hadn’t been approached by Rothschild.
“It’s a tricky situation and from an economic and debt sustainability perspective a haircut seems to be likely,” he said by e-mail on Friday.
Pressure is building on Ukraine to get bailout funds amid government forecasts that the economy will shrink as much as 11.9 percent this year and inflation will accelerate to 42.8 percent.
The IMF board will meet March 11 to discuss the disbursement of aid. Jaresko said last month that Ukraine will seek to reach an agreement on changing the terms of its debt before the Washington-based fund holds its first loan review, scheduled for June.
The central bank stepped up capital controls and hoisted the benchmark interest rate to 30 percent in the past week to stem losses in the hryvnia, which slumped 60 percent against the dollar in the past year in the world’s steepest slide. The measures helped the currency recover 20 percent this week, its biggest gain on record.