Ukraine on Brink of Default
Regent Capital, a large holder of the $155 million bond issue placed by
ING Barings for Ukraine, has rejected Kyiv's proposal for restructuring,
raising the prospect of default on $2.5 billion in eurobonds, the first
by a rated sovereign borrower, The Financial Times reported Friday.
Jayne Sutcliff, of Regent Capital, said on Thursday in London that the
company had rejected Ukraine's proposal to redeem 20% of the bonds and
restructure the remainder into three-year eurobonds. In her words, the
bond agreement carried explicit cross-default clauses and the condition
that it be governed by English law.
Previous restructuring of bonds did not trigger default because the
issues were governed by Ukrainian law.
On June 9 the Ministry of Finance was to have repaid the main part of
the ING Barings loan by redeeming the hryvnia-based bonds against which
it had issued and placed other securities. However, the ministry did not
make the payments. Minister of Finance Ihor Mitiukov said restructuring
negotiations with the bank continue.
Some bankers interpreted the absence of negative statements from the
bank after failure to repay the loan as a sign that ING Barings now wants
to settle the problem amicably, for example, by seeking more favorable
conditions for restructuring.
Oleksiy Plotnykov, Professor at the Institute of World Economy and International
Relations, thinks that a cross default "would deal a serious blow to the
state's image abroad... A cross default would mean a more tense relationship
with the International Monetary Fund and World Bank," Mr. Plotnykov told
the Center for Journalistic Research.
Meanwhile, the Finance Ministry with IMF support continues to negotiate
loan restructuring with ING Barings. No one knows when the talks will end,
but the danger of a cross default will no doubt make the Ukrainian government
more flexible.
By Vladyslav MYKHALIOV, Center for Journalistic Research






