Ukraine postpones debt payments to $20 billion

Jorgelina do Rosario, Rodrigo Campos and Karin Strohecker are written by Jorgelina do Rosario.

A two-year freeze on payments on nearly $20 billion in international bonds is being backed by Ukraine's overseas creditors, according to a regulatory filing on Wednesday, a move that will allow the country to avoid a debt default.

With no sign of peace or a ceasefire on the horizon nearly six months after Russia began on February 24, bondholders have agreed to postpone bond payments for 13 Ukrainian sovereign bonds maturing between 2022 and 2033, with no sign of peace or a ceasefire.

The government in Kyiv launched a website called newsserviceweb.oslobors. On July 20 there is no message 31494 a consent solicitation, which is a formal request to agree with creditors on changes to their debt contracts.

Ukraine said it would save $5 billion over the next 24 months as it manages its dwindling financial resources.

BlackRock Inc, Fidelity International, Amia Capital and Gemsstock Ltd are some of the biggest holders of Ukrainian debt, whose value has fallen by more than 80% since the construction of Russian troops on its borders began late in 2021.

Documents for the consent solicitation showed that any modification needed approval from the holders of two-thirds of all bonds and more than 50% of each issue outstanding.

Ukraine received and accepted consents of about 75% of the total amount of the outstanding securities, according to the filing.

A consent solicitation approved by creditors includes changes to about $2.6 billion of so-called GDP warrants, a derivative security that triggers payments linked to a country's gross domestic product.

Some of the world's largest investment firms have agreed to freeze Ukraine's debt payments.

With the country facing an estimated 35% to 45% economic contraction in 2022, bilateral creditors such as the United States, Britain and Japan backed a debt repayment delay and a group of governments in the Paris Club agreed to suspend payments until the end of 2023.

Carlos de Sousa, emerging markets debt portfolio manager at Vontobel Asset Management said that this will improve foreign currency cash flow for Ukraine, but by itself it won't be enough to stabilize FX reserves.

Ukraine's international reserves fell from $28.1 billion in March to $22.4 billion by the end of July.

De Sousa said a comprehensive debt restructuring is expected after the debt freeze, as it is unlikely that Ukraine will be able to regain market access in two years.

In late 2015, Ukraine completed a $15 billion debt restructuring after an economic crisis linked to a Russian-backed insurgency in its industrial east. The deal left it with a large number of payments due annually between 2019 and 2027, and in 2017 it returned to international markets.

With a monthly shortfall of $5 billion, Ukraine relies heavily on foreign financing from Western allies and multilateral lenders, including the International Monetary Fund IMF and the World Bank.

Since Russia's invasion, it has received $12.7 billion in loans and grants, 44% of which has been committed since the invasion, according to Finance Ministry data.

The United States said this week it would provide additional $4.5 billion to Ukraine's government, bringing its total budgetary support to $8.5 billion since Moscow began what it calls a special military operation.

Ukraine wants to agree on a $15 billion -- $20 billion IMF programme to shore up its economy, according to central bank governor Kyrylo Shevchenko, and the government expects to receive this assistance before the end of the year.