10:49 02.09.2015

Risk of Ukraine's default remains in place in short term - Moody's

2 min read
Risk of Ukraine's default remains in place in short term - Moody's

Moody's Investors Service says the risk of Ukraine's default on its payments remains in place even before it starts settling its foreign debt, the restructuring of which has been cleared with the ad hoc committee of creditors, Moody's said in a report posted on its website.

Moody's, in particular, anticipates problems with the Ukrainian economy's recovery within the next several years following the significant GDP drop and inflation hike. Moreover, the agency believes the situation has been complicated by deep political disagreements and the ongoing military conflict in eastern regions, which has led to the loss of a number of major industrial assets.

In addition, the bond restructuring deal concluded recently does not cover $1.8 billion in other obligations, including Eurobonds held by the city of Kyiv and Ukrzaliznytsia, and government-guaranteed loans.

No solution has been found for restructuring $3 billion in Eurobonds held by the Russian National Welfare Fund, and the agency suggests that the matter might be raised at the next round of negotiations between Ukraine, Russia, and the EU slated for September in Minsk.

It was reported earlier that the Ukrainian government announced on August 27 that it had reached agreement with the ad hoc committee of creditors on restructuring its $18 billion debt, which implies that 20% of the principal debt would be written off, the repayment of the principal debt would be deferred by four years, and that 20-year value recovery instruments (VPI) pegged to GDP growth would be issued.

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