Ukraine agrees 20% debt haircut with creditors, Russia refuses to take part

Ukraine has agreed a restructuring deal to reduce its debt burden by about $3.6 billion. Moscow has refused to agree to Kiev’s terms.

US-born Ukrainian Finance Minister Natalie Jaresko, who was granted Ukrainian citizenship when President Petro Poroshenko appointed her last December, has agreed with a creditor committee led by Franklin Templeton (which owns about $7 billion of Ukrainian bonds) on a 20 percent write-down of about $18 billion worth of Eurobonds, the first of which mature in less than a month.  

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Russia won’t participate in Kiev’s debt restructuring, said Russian Finance Minister Anton Siluanov after the news broke.

Ukraine should solve the issue of official debt settlement, separately from commercial debt, said Siluanov on Thursday in an interview with Russian TV channel Rossiya-24.

"We identify ourselves as official creditors. The settlement of the debt is first with the commercial creditors. The settlement of the debt to official creditors, with countries like Russia, is considered completely separately," Siluanov said.

December's payment of $3 billion in Eurobonds to Russia is the largest due for Ukraine this year. Most experts believe the Ukrainian government does not have enough money, so default is considered likely.

Ukrainian Prime Minister Arseny Yatsenyuk said that Russia didn’t accede to the creditors' committee and wouldn’t receive better terms than the other lenders under any circumstances.

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Ukraine has been negotiating the restructuring of its debt since March. The country has repeatedly warned about the possibility of a moratorium on foreign debt payments if creditors didn’t agree to the restructuring, including a write-off of about 40 percent.

Bloomberg forecasts Ukraine’s economy is expected to contract 8.7 percent this year.