Ukraine defaults on $3 billion Eurobond to Russian Federation
In a statement Thursday, the Ukrainian finance ministry said it was forbidden from repaying the Russian bond under the terms of its August debt restructuring.
The dispute over the budget and tax code has already delayed the disbursal of the latest loan tranche of about $2 billion, as Ukraine battles recession amid the conflict against Russia-backed separatists in the east. Violations persist, however. A prolongation had thus been considered unavoidable.
Last month, Russian President Vladimir Putin proposed a debt restructuring, and said that his government would be willing to agree to payments of $1 billion a year between 2016 and 2018 – an offer Ukraine turned down, claiming that it can not offer Russia a better deal than the one it negotiated with other debt holders. Yanukovych fled the country in February 2014.
Storchak told reporters that Ukraine’s move would not change Russia’s plan to take Ukraine to court once the grace period on the debt payment expired.
The moratorium would be in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision …”
The country’s finance ministry on Friday said that it expects that the new rule “will allow the International Monetary Fund to continue financing Ukraine” despite Kyiv’s position on the bond and suspension of payment. “From today all payments are suspended till our [government – Ed.] or a court makes a decision”, Yatsenyuk said.
Those people include “not only ethnic Russians, but also Russian speakers who are looking toward Russia“, Putin said. However, on December 18 he admitted that Russian Federation did have personnel in eastern Ukraine who were carrying out certain military tasks.
Ukraine’s restructured dollar-denominated bonds stayed lower, with the yield on the debt due 2025 rising two basis points to 9.65pc by 12:05pm in Kyiv.
William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear.
The IMF this week agreed with Moscow that the bond consists of an official loan.
