Ukraine has managed to restructure its $2.7 billion foreign commercial debt, thus avoiding formal default, the Dow Jones Newswires Agency believes. The latter reports, quoting representatives of the ING Barings Bank, that this country managed to persuade owners of 85% of its commercial debentures to exchange the old liabilities for new securities to mature in seven years by March 15. According to Dow Jones, official confirmation of this must have been made last Wednesday, when the term of Ukraine’s proposal to exchange liabilities expired.
The Financial Times quotes official spokespersons of ING Barings, the lead manager for Ukraine’s foreign commercial debt restructuring, as saying that the bank immediately got considerable support from institutional investors. At the same time, small investors “have been waiting to the last minute to make their bids.”
Meanwhile, far from all experts think it feasible that owners of 85% of commercial liabilities should be prepared for restructuring. It is not ruled out that the number of those who refuse to do so may increase after the IMF said in a March 14 press release that Ukraine must have received International Monetary Fund money three times in late 1997 and early 1998, overrating the value of its gold and hard-currency reserves. The statement notes that, according to the existing information, a number of operations performed in 1996-1998 “made an impression that Ukraine’s hard-currency reserves were larger than in reality.” As The Financial Times explains in a March 15 article, this means the IMF would not have given its loan if it had known the true state of affairs. These conclusions were made on the basis of the preliminary results of the audit conducted by Price Waterhouse Coopers. Moreover, the daily writes, the IMF said on the eve of the arrival of a Ukrainian delegation in Washington for talks about the resumption of EFF that it was suspending credit to Ukraine until it found out the true size of hard-currency reserves.
Meanwhile, the facts the IMF has allegedly revealed only today were well known in Ukraine back in May 1998, when the Viktor Suslov parliamentary commission that inquired into NBU activities reported to Verkhovna Rada on the work done. Moreover, Mr. Suslov on behalf of the commission sent the relevant documents to the IMF, asking the latter to clarify the situation with its loans. However, the “reply” only came on the eve of the day (March 15) when Ukraine was to announce to the world if it succeeded in restructuring the liabilities and thus avoid the default.
Meanwhile, last Tuesday the National Bank of Ukraine press service released a statement which claims, among other things, that “The management of hard currency reserves... was not aimed at making private or political gains.”
The development of the NBU scandal, detrimental to Ukraine, will allow investors to forecast the following chain of events: audit results, withholding the next installment, thwarted hopes for debt restructuring, and default. However, the Ukrainian Ministry of Finance has not yet said its final word. Ministry spokesperson Iryna Bezverkha told The Day that the intermediate results of “persuading” the investors who own Ukraine’s Eurobonds (“whether or not we have achieved 85%”) will be known in the next few days, when preliminary results have been summed up.
INCIDENTALLY
The Ukrainian government’s plan to restructure $2.6-billion foreign commercial liabilities has been approved by creditors who own about 88% of the bonds subject to exchange, the Bloomberg Agency reports, quoting ING Barings. According to Bloomberg experts, this agreement increases this country’s chances to sign the deal on IMF credits frozen last year. The agreement reached with the creditors is the cornerstone of Ukrainian government policy which will give it a breathing space to put its finances in order, the agency quotes Simon Drake-Brockman, ING Barings executive director for Europe, as saying.
