Ukraine hopes for deal with creditors on Aug 10-11, or alternative options for financing IMF program to be used

A new meeting is scheduled for Monday or Tuesday next week to give the committee more time to prepare an improved and revised proposal on debt restructuring, the ministry said in a statement on Wednesday. "However, given the legal and timing constraints of reaching and implementing any settlement, failure to reach an agreement at the sovereign level early next week would force Ukraine to implement alternative options for financing its IMF-supported program," the ministry said. "Due to these constraints, it is also the last opportunity to reach a full agreement in advance of the September and October eurobond amortizations and next IMF review now planned for September," Finance Ministry reported. The ministry says that its goal has always been to reach a negotiated settlement with its debtholders in line with the targets of the IMF-supported program. The ministry stressed that Ukraine had already reached such agreements with the debtholders of its state owned banks, Ukreximbank and Oschadbank. Sovereign debt restructuring is part of an international bailout program developed for Ukraine, however, Ukraine and its creditors stood at an impasse from March to the end of June. In the middle of May, Kyiv even announced it might introduce a moratorium on debt servicing if the holders of about $20 billion in bonds did not agree to enter the talks where the Finance Ministry proposed writing off 40% of principal debt, extending maturity and reducing bond coupons. The creditors in turn tried to persuade that Ukraine would be able to meet the IMF parameters without "haircut" writedown on debt's principal and offered long-term debt rescheduling. Their proposal would save $16 billion in debt payments due to a complete halt to the payment of principal debt until 2019. The Finance Ministry said that the creditors' proposal did not meet the targets agreed with the IMF. What is more, it also had the withdrawal of $8 billion from the central bank's reserves, which was also opposed by the IMF. The talks were unblocked after a meeting of Ukraine with the creditors and IMF representatives in Washington on June 30. In the middle of July, the sides announced they had achieved progress at the talks, and last week international media reported that the creditors had agreed for the first time on writedown, agreeing to a mere 5% haircut. Finance Minister Natalie Jaresko said that the haircut is insufficient, and on August 4, Ukraine sent the creditors a revised debt restructuring proposal whose details haven't been disclosed, and originally scheduled a meeting with creditors in London on August 6. The revised Memorandum of Economic and Financial Policies of the Ukrainian authorities, prepared as part of cooperation with the IMF and published early in August, admits both the payment of $500 million on eurobonds in September and $3 billion on Russian bonds in December, and the introduction of the debt repayment moratorium. At the same time, the IMF announced it hoped that Ukraine and the creditors would reach an agreement. The Ukrainian authorities in turn expect to complete the talks with the creditors by the end of September. As of today, only state-run Ukreximbank and Oschadbank managed to agree with foreign private creditors to restructure loan participation notes worth $1.5 billion and $1.3 billion, respectively, and other types of liabilities. However, the state banks' debt restructuring included only maturity extension without debt haircuts.