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
Tin mới
Khước từ trách nhiệm: các tổ chức thuộc XM Group chỉ cung cấp dịch vụ khớp lệnh và truy cập Trang Giao dịch trực tuyến của chúng tôi, cho phép xem và/hoặc sử dụng nội dung có trên trang này hoặc thông qua trang này, mà hoàn toàn không có mục đích thay đổi hoặc mở rộng. Việc truy cập và sử dụng như trên luôn phụ thuộc vào: (i) Các Điều kiện và Điều khoản; (ii) Các Thông báo Rủi ro; và (iii) Khước từ trách nhiệm toàn bộ. Các nội dung như vậy sẽ chỉ được cung cấp dưới dạng thông tin chung. Đặc biệt, xin lưu ý rằng các thông tin trên Trang Giao dịch trực tuyến của chúng tôi không phải là sự xúi giục, mời chào để tham gia bất cứ giao dịch nào trên các thị trường tài chính. Giao dịch các thị trường tài chính có rủi ro cao đối với vốn đầu tư của bạn.
Tất cả các tài liệu trên Trang Giao dịch trực tuyến của chúng tôi chỉ nhằm các mục đích đào tạo/cung cấp thông tin và không bao gồm - và không được coi là bao gồm - các tư vấn tài chính, đầu tư, thuế, hoặc giao dịch, hoặc là một dữ liệu về giá giao dịch của chúng tôi, hoặc là một lời chào mời, hoặc là một sự xúi giục giao dịch các sản phẩm tài chính hoặc các chương trình khuyến mãi tài chính không tự nguyện.
Tất cả nội dung của bên thứ ba, cũng như nội dung của XM như các ý kiến, tin tức, nghiên cứu, phân tích, giá cả, các thông tin khác hoặc các đường dẫn đến trang web của các bên thứ ba có trên trang web này được cung cấp với dạng "nguyên trạng", là các bình luận chung về thị trường và không phải là các tư vấn đầu tư. Với việc các nội dung đều được xây dựng với mục đích nghiên cứu đầu tư, bạn cần lưu ý và hiểu rằng các nội dung này không nhằm mục đích và không được biên soạn để tuân thủ các yêu cầu pháp lý đối với việc quảng bá nghiên cứu đầu tư này và vì vậy, được coi như là một tài liệu tiếp thị. Hãy chắc chắn rằng bạn đã đọc và hiểu Thông báo về Nghiên cứu Đầu tư không độc lập và Cảnh báo Rủi ro tại đây liên quan đến các thông tin ở trên.
