Conflict, creditors and a car crash: How Ukraine clinched a wartime debt restructuring
Adds no comment response from International Monetary Fund in paragraph 16
By Marc Jones and Karin Strohecker
LONDON, Sept 3 (Reuters) -Just a few months after Russia invaded Ukraine, the country's financial adviser, Rothschild & Co, handed Kyiv's debt chief a thick black folder detailing major sovereign debt restructurings of the past 30 years.
For Yuriy Butsa, 40, it would prove essential reading. He hadn't been involved in the debt rework Ukraine required in 2015 after Russia annexed Crimea and it wasn't long before he would need to draw on the expertise.
Facing an economy crippled by the cost and destruction of the war, by August 2022 Ukraine agreed with creditors to pause payments on its bonds. With no end to the conflict in sight, last week the nation sealed one of the fastest - and largest - debt restructurings in history.
Eclipsed in scale only by Argentina and Greece, the restructuring of more than $20 billion of debt will save Kyiv $11.4 billion over the next three years - crucial for both its ongoing war effort and its International Monetary Fund programme.
"A stable situation where no more question marks are out there can only benefit Ukraine," Arvid Tuerkner, managing director for Ukraine and Moldova at the European Bank for Reconstruction and Development, one of Kyiv's big multilateral partners, told Reuters.
This account of how Ukraine's agreement with bondholders came together is based on interviews with five sources on both government and investor side who were involved in the talks and agreed to speak with Reuters on the condition of anonymity.
REVIVING TALKS
Initial negotiations between the government and its lenders hadn't gone to plan.
Talks in June had broken down after a couple of weeks with the core committee of bondholders complaining that the writedown Ukraine was demanding was "significantly in excess" of the 20% most had expected and risked doing "substantial damage" to relations.
With less than two months till the August 2022 payment moratorium expired, Rothschild arranged face-to-face meetings at the firm's elegant Parisian offices on the leafy Avenue de Messine.
Early on July 16, representatives of some of the world's top asset management firms and their legal and financial advisers arrived in Paris, where they joined Butsa, Ukraine's long-term legal advisers White & Case and the Rothschild team.
A raft of meeting rooms, adorned with pictures of the famous Rothschild vineyards, had been reserved to allow for joint discussions and private strategising.
The mood was pragmatic from the start, sources on both the government and the creditor side said. Everyone had come in the hope of doing a deal - even though both sides were still far apart.
EXCEPTIONAL UNCERTAINTY
There was reason to be back in talks.
As well as the looming deadline, the IMF, providing Ukraine with $15.6 billion of support, had just updated its projections. They had reflected a worsening economic picture, but nevertheless gave a new base to work from.
Ukraine kicked off by setting out its proposal. Members of a key bondholder group, representing some of the world's biggest asset managers such as BlackRock and Amundi, got to explain their demands too: that Ukraine restart 'coupon' payments immediately, offer a path to a higher principal recovery and, importantly, "keep it simple".
Both the IMF and Rothschild declined to comment for this story but according to two sources, the IMF's experts were on call in both Kyiv and Washington during the negotiations in an exceptional arrangement.
That was vital for doing the labour-intensive modelling needed to work out what each proposed compromise would mean for Ukraine's longer-term debt sustainability.
By 4am on July 18 in Paris, or 5am in Kyiv and nearly 48 hours into the process, another request was made to the IMF teams to rerun the numbers. Some of those crunching the figures had barely slept.
The Fund's help was invaluable, its staff worked at breakneck speed and helped to overcome multiple obstacles.
Discussions around how to tap Russia's frozen assets and confusion around a new IMF policy designed to try and help it adapt to the realities of a full-blown war had meant talks hadn't been able to start at April's IMF Spring meetings as hoped, and were still causing issues.
Butsa's team and the IMF were also adamant that there couldn't be anything like the costly 'GDP warrants' used to sweeten its 2015 restructuring. Under their terms, Kyiv is required to stump up a large chunk of its economic output if nominal GDP exceeds $125.4 billion and annual growth hits 3%.
But Ukraine was providing an alternative in the form of a simpler GDP-linked bond, and creditors were also being offered the instant coupon payments that they had wanted, starting at a rate of 1.75% and eventually rising to 7.75%.
Structured to be eligible for the main bond indexes and therefore easier to buy and sell, it meant the gap between the sides had been as good as bridged. With just the fine print to finalise, those in Paris made their exits as the packed city put the finishing touches on its Olympics preparations.
CAR CRASH
The drama wasn't entirely over, however.
Driving back from the Polish airport where his flight had landed - the most reliable route since Russia's invasion halted flights from Kyiv - a driver turned across Ukraine debt chief Butsa's VW Golf.
No one was hurt, but Butsa was now sitting in an insurance office in Lviv filling out forms whilst taking calls to finalise the statement that the $20 billion restructuring had, in principle, been agreed.
The resounding final result from the bondholder vote was more than 97% support.
War worries War worries https://reut.rs/3LqQGlW
Reporting by Marc Jones and Karin Strohecker in London; additional reporting by Libby George; editing by Elisa Martinuzzi and Christina Fincher
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔