Dear Leonid

The following is a translation of an article carried by the German financial newspaper, Handelsblatt , of Frankfurt and D Я sseldorf, September 6, 1999. Its author is Robert Landgraf, a well-known financial analyst.

Dear Leonid,

My worst expectations seem to be coming true. After your latest statements the payment of eurobonds by your country, Ukraine, turned out under a serious threat. Being President, you can perhaps imagine the terrible shock that pierced my whole body when I learned Friday (i.e., September 3, 1999 — Ed.) of a sharp drop in the rate of my bonds maturing in 2001. Their value plummeted from 53% to 35% of nominal face value.

Things seemed all right. You carried out the request I expressed in my last February letter faithfully, that of timely interest payments. Now what? Of course, I am a pest, but your ill-considered statements did more than ruin my day. I was leaving for a meeting with colleagues from the First Hypothetical Bank to refresh old and establish new ties. Of course, I had to cancel. In addition, I did not like the manner in which your words reached the public. If you say that “in 2000 we will have to pay over $3 billion worth of foreign debt which we do not have in our budget,” at least make sure there are no journalists around. You can do so easily whenever you hit the roof if there is something not to your liking concerning the election campaign. Or maybe your fear of the November elec tions (well, he's a day off the mark—Ed.) is so great that you have thrown caution to the winds?

One thing is clear, Leonid. I will not sell my Ukrainian bonds at the current rate. Whether I like it or not, I will have to morally attune myself to new sad tidings from your country. You are probably the first country in postwar history to postpone eurobond payments, moreover one that has to do so because its economy is lying prostrate.

Indeed, there are various possibilities: transferring payments to a later date, reducing coupon payments or the principal, or any combination of the above. I ask you to please continue with timely coupon payments and arrange only for the principal payment's deferment over a couple of years. This would suit the parties concerned, right? And you could have a respite then to get you economy into some kind of motion; there would be no insurmountable obstacle to your rapprochement with Europe; and investors would not have to patch holes in their pockets. As for new Ukrainian bonds, I will not even touch them, not now, and I hope you can understand why. First, I would like to see real progress and serious decisions made.