Cash-strapped Ukraine faces Wall Street pushback in debt talks
Ukraine faces a new battle on the economic front – this time over millions of dollars in interest payments the war-torn nation owes on debts to Wall Street, The Post has learned.
Volodomyr Zelensky’s cash-strapped government wants to restructure a $3 billion bond and is also seeking approval by August 9 to delay interest payments of around $75 million to a lending group which includes Franklin Templeton, Blackrock and Aurelius Capital Management, a source with direct knowledge of the situation said.
Ukraine is losing $5 billion a month as it struggles to repel an invasion launched in February by Russian strongman Vladimir Putin, a source close to the Ukrainian government has said. The United States sends Zelensky $1.5 billion a month to help offset the economic impact, in addition to military weapons, the source added.
“Taxpayers are giving billions of dollars to support Ukraine. Why is the lenders’ desire to have an advantage greater than their desire to save the world from calamity? the source said.
The lending group, meanwhile, is prepared to delay future interest payments to avoid bankruptcy for the beleaguered country. But some creditors still oppose Ukraine’s demand to settle the debt in the next few years, a source familiar with the lenders said.
“We’re prepared to defer the money, but that doesn’t mean they should have the right to cut the deal,” the source said.
Ukraine agreed to the unusual $3 billion principal-free loan when it was on the verge of bankruptcy in 2015. The terms would allow lenders – from 2025 – to collect 40% of the country’s gross domestic product. country each year if it exceeded $125 billion and grew by more than 4% per year.
JPMorgan in 2021 estimated the value of the bonds could be around $8 billion, but that was before Putin’s forces bombed the country and devastated commerce. Ukraine’s GDP has fallen to around $100 billion, according to the International Monetary Fund, after hitting $200 billion last year, its highest level ever.
Ukraine wants to repay the bonds in 2025, 2026 or 2027 — before annual payments on bonds maturing in 2039 become potentially onerous — so that the financially-struggling government can more easily secure new funding, the officials said. sources.
The country is working with JPMorgan and law firm White & Case to convince enough lenders to restructure the bonds by August 9, the source familiar with the lenders said. Lenders holding 75% of the $3 billion bond must agree to any changes, the source said.
“The opposition is building,” the source said. “It may not pass.”
Last month, Ukraine’s ministry said it had “received explicit indications of support” for the plan from a select group of lenders, including BlackRock.
Aurelius, who made his fortune in troubled sovereign debt and is known for suing Puerto Rico and Argentina so he could get his bonds repaid in full, was not mentioned.
Nor does Franklin. As of 2015, the company held more than a third of the loan and is still a lender, although it may be at a lower level, sources said.
Franklin and Blackrock declined requests for comment when contacted by The Post.
Aurelius did not return a call for comment.
None of the lenders have made a dime on their investment so far, sources said.
“The bond risk was the downside we are seeing today,” the government source said.