Ukraine Debt Situation Nears Tipping Point + Update

heezsafe

Ukraine raised the pressure on creditors to accept a writedown on their holdings on Tuesday when it passed a bill enabling the government to halt payments if it can’t reach agreement with bondholders by its June 15 target.

Knife-catchers Noteholders BTG Pactual Europe LLP, Franklin Advisers Inc., TCW Investment Management Company and T. Rowe Price Associates, Inc. formed a committee awhile back and submitted the outline of a proposed consensual restructuring last month, followed by a detailed proposal on May 9th. Still waiting at the negotiating table for Ukraine to show up.
http://ftalphaville.ft.com/2015/05/18/2129699/and-then-there-were-four-ukraine-bonds-edition/

Russia (pre-crisis $3B noteholder) calls the BS what it is and may take a different route. The Russian bond is governed by English law and any disputes related to it would be settled in an English court, according the bond prospectus. The bond has a covenant allowing the holder to demand its money back if Ukraine’s public debt tops 60 percent of economic output, which the IMF said took place last year.
http://www.bloomberg.com/news/articles/2015-05-20/russia-will-take-ukraine-to-court-if-june-coupon-payment-missed

Experts agree that Tuesday's vote meant a technical default for the country and would impede Ukraine’s ability to raise private investment from the EU and the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), a European source told TASS on Wednesday. Failure to cut a deal risks future tranches of a $17.5 billion International Monetary Fund loan that Ukraine needs.
http://www.zerohedge.com/news/2015-05-20/putin-pans-ukraines-debt-moratorium-de-facto-default-threatens-court

JohnChisum

Greece went through a similar fashion as it borrowed money from the IMF in order to pay their loan to the IMF. It's crazy. Now they are due in something like ten days from now and the IMF won't lend them anymore funds.

heezsafe

Update
The adversarial atmosphere of negotiations increases.
http://www.bloomberg.com/news/articles/2015-06-11/ukraine-bonds-drop-as-jaresko-said-to-seek-40-principal-cut-iary9dc1

The country will stop making payments on its debt if talks don’t make progress, Finance Minister Natalie Jaresko told reporters in Washington Wednesday. Bondholders are “deeply concerned” about Jaresko’s stance, a creditor group led by Franklin Templeton said in a statement today.
“Minister Jaresko has been in possession of a detailed IMF-compliant solution from the bond committee for over a month,” the committee said today. “We are ready and willing to start talks at any time.”

STB65

I suppose this is unsympathetic, but one doesn't always profit from buying while hearing cannons. I don't know if the investors in these funds realized their risk, but it seems unfair to expect foreign courts to make these funds whole. The fund managers made a mistake.

I made others. (I hope Fido managers make fewer.)

Sven

These countries already have serious structural problems to begin with. Thus It is unrealistic for IMF (particularly Germany) to expect them to meet their debt obligation. The run on the banks scenario already started in Greece. Ted posted a similar picture on German currency after WWI.

Crash

Yes, I saw pictures of wheelbarrow loads of Weimar Deutschmarks ready to be burned as fuel, because buying wood with the Deutschmarks was too expensive.