Ukraine avoids default by agreeing bondholder deal, finance minister says
Adds quote in paragraph 2, details of debt deal and context on likely short-term default from paragraph 3
July 26 (Reuters) -Ukraine's finance minister said on Friday that Ukraine had avoided a default by agreeing a preliminary agreement with bondholders this week.
"We have formed friendly relations with creditors and have not defaulted," Finance Minister Serhiy Marchenko said in televised comments. "We avoided the default that factually we were told we were doomed to."
Ukraine this week announced a preliminary restructuring deal with a committee of those holding the $19.7 billion in bonds - its second debt rework in a decade prompted by a Russian invasion.
A two-year payment moratorium on those bonds expires on Aug. 1.
Bondholders still need to sign off on the deal, which they are expected to do, but the legal mechanics will likely take weeks. Ukraine also owes a $34 million coupon payment on its 2026 Eurobond due on Aug. 1, with a 10-day grace period.
That means the nation, like in 2015, is likely to enter a short-term default that would have a less significant impact on its long-term borrowing prospects than a default with no deal in sight.
Earlier this month, Ukraine's parliament passed a law allowing the government to suspend foreign debt payments, though the president has yet to sign it.
This week, ratings agency Fitch downgraded Ukraine's credit rating further into default territory.
Reporting by Yuliia Dysa; writing by Tom Balmforth and Libby George; editing by Alex Richardson and Ros Russell
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