Ukraine Bonds at 60 Cents Seen Signaling Risk of Default
By Krystof Chamonikolas Jan 6, 2015 10:03 AM ET
Ukraine’s deepening recession and mounting debt burden have bondholders to Moody’s Investors Service weighing prospects for a sovereign default.
The country’s July 2017 notes are trading below 60 cents on the dollar, extending a record monthly selloff in December, down from above par a year ago. Ukrainian debt lost 21 percent in 2014, the worst slump after Venezuela among 59 countries tracked by the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS)
Investors are fleeing as central bank Governor Valeriya Gontareva said on Dec. 30 that Ukraine is facing a “full-blown financial crisis” and that its economy probably shrank 7.5 percent in 2014 amid a collapse in the currency and the war with pro-Russian separatists in the country’s east. Bond prices are signaling expectations of delayed repayments and possible losses on principal, according to Lutz Roehmeyer at LBB Invest.
“I hope for a rescheduling but I fear it may be a complete restructuring,” Roehmeyer, who oversees $1.1 billion of debt from emerging markets including Ukraine, said by phone from Berlin on Jan. 2. “If you expect Ukraine to lengthen the maturities by three to five years only, without a haircut, the bonds should trade above 80 cents.”
IMF Review
International Monetary Fund representatives are scheduled to arrive in Kiev this week to review Ukraine’s steps to cut the budget deficit before releasing further funds from a $17 billion loan package, Prime Minister Arseniy Yatsenyuk said on Dec. 30. Two tranches of the aid, due last year, have been delayed as the country took a month to form a coalition government after Oct. 26 elections, and another month to pass its 2015 budget.
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http://www.bloomberg.com/news/2015-01-05/ukraine-bonds-at-60-cents-seen-signaling-risk-of-default.html
