International holders of at least 25 percent of Ukraine’s $500 million eurobonds that are expiring in five days could block the nation’s $18 billion external debt restructuring deal that parliament approved Sept. 17.
Represented by international law firm Shearman & Sterling, the group of investors has since Sept. 9 been seeking fairer distribution of the new notes that Ukraine is slated to release so that the effective maturity extension for their paper would be about four years, Bloomberg reported.
Under the current debt restructuring terms, Ukraine is replacing the existing 13 eurobonds with nine new equal bonds that will have a 7.75-percent coupon rate and which will mature yearly starting in 2019.In order for the deal to go through, 75 percent of bondholders need to vote in favor with two-thirds of creditors represented. Thus, any group of bondholders holding 25 percent or more in a particular bond series can block the deal, leaving a bond in default.
Nomura International economist Timothy Ash suggested in an emailed note that someone may have been scooping up Ukraine’s shortest-dated eurobonds.
“All this perhaps explains the out-performance of the short end in recent weeks, as someone has been accumulating a position readying for ‘action’ one way or another,” he said. “I guess there will be questions as to who are the drivers of the short end group, and are there Russian interests represented therein which may have wider motivations.”
According to Bloomberg, the “law firm didn’t didn’t name any members it was representing or disclose the exact amount they owned.” Shearman & Sterling additionally told Bloomberg that U.S. asset manager Franklin Templeton, which led the bond restructuring talks with Ukraine’s finance ministry, hasn’t responded to the dissenting group’s request. Finance Minister Natalie Jaresko told Interfax-Ukraine onSept. 11 that the minority group of bondholders is not in contact with herministry. “As far as I know, they are in contact with members of the(ad hoc creditors) committee,” she said, adding that she expects therestructuring of eurobonds to be finalized in October
Kyiv Post editor Mark Rachkevych can be reached at rachkevych@kyivpost.com.
