Even in times of war, Ukraine has to deal with its debts. A two-year moratorium on interest payments on $20 billion in bonds will end in August. And some private lenders would like to see at least part of the money from the bonds in their accounts next year. For example, Black Rock, which owns about $4 billion in bonds, has hired lawyers to settle the debt, according to Wall Street Journal sources. And other companies can join them. The companies want to resume interest payments and also propose to forgive part of the debts. In the event that Ukraine does not reach an agreement with its creditors on debt restructuring, it is at risk of insolvency, the Wall Street Journal reports.
According to information from the Wall Street Journal, Black Rock and Pimco, for example, intend to apply for their money. Black Rock has already recently hired the law firm Weil Gotshal & Magnes, which is dedicated to restructuring and has formed a group of creditors who want to apply for their claims. “The group expects constructive involvement in the resolution of the Ukrainian national debt,” said a spokesman for the lenders.
Lawyers should soon start negotiating with Ukraine about up to 20 billion dollars of debt. Black Rock itself, which initiated the negotiations, owns four billion dollars worth of Ukrainian bonds. The private lenders themselves hope to agree with Ukraine on annual interest payments worth half a billion dollars in exchange for the forgiveness of part of the debts.
According to Reuters, representatives of private lenders met with representatives of the International Monetary Fund in Washington in April. They are also negotiating with the Ukrainian Ministry of Finance.
The negotiations are worrying the International Monetary Fund and Ukraine’s allies. After the invasion of Russia, they agreed with Ukraine on a debt holiday until 2027. They are worried that the Ukrainians’ money would end up in private hands first. It is private investors as significant holders of government bonds that are a novelty, at least according to Georgetown University professor Anna Gelpernová. “This is a collision of the geopolitics of the First World War with the financial markets of the 21st century. These entities invest the money of third parties such as pension funds. And they have certain obligations to their clients. And because of this, they will want Ukraine to start paying its debts again and have access to international markets, even though the war is not over,” Gelpern told the Wall Street Journal.
According to the Wall Street Journal, private investors did not expect the war to last more than two years. Governments and the IMF are so far skeptical of the proposals of private investors. However, negotiations are not prevented. According to Wall Street Journal sources, however, they want much smaller payments than the proposed half a billion dollars a year. Private investors are also talking about the possibility of using frozen Russian assets to repay debts. The possibility of sending this money to Ukraine has been discussed several times in recent months. However, this would be an unprecedented step and politicians and economists are rather skeptical.
According to the Wall Street Journal, if Ukraine does not agree on new installments or interest rates with private creditors, it would be at risk of insolvency with serious consequences on world markets.
