Creditors going after Kiev to resume debt payments: WSJ
2 Min Read
The bondholders have formed a committee and retained legal counsel to engage in negotiations with Kiev over the matter.
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Ukraine's President Volodymyr Zelensky during a press conference with Finland's President Alexander Stubb, in Kiev, Ukraine, Wednesday, April 3, 2024. (AP/Vadim Ghirda)
Foreign bondholders are aiming to reach an agreement with Ukraine to recommence government debt payments, which were halted two years ago due to the war with Russia, The Wall Street Journal reported.
However, the newspaper pointed out that there is concern among the United States and its allies that taxpayer money designated to assist Kiev may ultimately be directed to creditors.
The suspension of debt payments occurred two years ago when lenders granted Ukraine a credit holiday, anticipating a swift resolution to the conflict, but their patience is now waning, The Wall Street Journal cited informed sources as saying.
According to the report, the foreign creditors intend to exert pressure on Kiev -- which recently received approximately $60 billion in US aid -- to resume interest payments starting next year. The timing of the request comes as Ukraine struggles to contain advancing Russian forces and losing control of numerous territories.
The bondholders, which include BlackRock and Pimco and represent roughly one-fifth of Ukraine's $20 billion outstanding Eurobonds, have formed a committee and retained legal counsel to engage in negotiations with Kiev, the newspaper mentioned.
Their objective is to strike a deal that would restart payments while also forgiving a significant portion of the outstanding debt, anticipating to receive up to $500 million in annual interest.
Meanwhile, Kiev's advisors aim to involve authorities from the United States and other nations in these discussions. But Washington and its allies are worried that if Ukraine resumes government debt payments, their taxpayers' funds may end up in the hands of bondholders, The Wall Street Journal noted.
It is noteworthy that these countries had granted Ukraine a debt moratorium until 2027 on approximately $4 billion of its own loans but fear that Kiev may prioritize repaying bondholders over repaying interest on these loans, the report emphasized.
According to The Wall Street Journal, if the negotiations fail, Ukraine could face default in August when the creditors' debt moratoriums expire, which would tarnish its reputation among investors and impede its ability to secure additional borrowing opportunities.
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