Ukraine fails to make final eurobond coupon payment in grace period

By Caroline Salls

Pittsburgh, Dec. 31 – Ukraine failed to make the $3,075,000,000 final coupon payment on the eurobond held by the Russian Federation before the expiration of the grace period on Dec. 31, triggering a payment default on the eurobond, according to a news release.

As a result of the payment default, the Ministry of Finance of the Russian Federation has initiated procedures with eurobond trustee The Law Debenture Corp. plc with a view to beginning legal proceedings as soon as possible.

According to the release, a formal legal complaint against Ukraine will soon be filed in an English court.

The Russian Federation said in the release that Ukraine has never responded to the proposals made by the president of the Russian Federation at the G20 meetings in November to extend the repayment of the eurobond over a three-year period and has never made any proposal that recognizes the eurobond as an official sector credit.

Instead, the federation said Ukraine voluntarily included in its new private sector bonds a so-called “most-favored creditor” clause that effectively prohibits it from repaying the Russian Federation’s eurobond or offering any alternative terms that are consistent with the eurobond’s status as an official credit.

“This self-imposed constraint cannot be used by a sovereign debtor as an excuse for the failure to negotiate in good faith, still less as any legitimate basis for suggesting that Ukraine is unable to comply with its legal obligation to repay the Russian Federation,” the release said.

The Russian Federation said it has always been willing to consider contributions consistent with the IMF-sponsored program for Ukraine.

“Unless Ukraine changes its position and begins to negotiate in good faith, the IMF executive board would not have any other option than to consider whether funding Ukraine would be permissible under extended fund facility arrangement with a view to inconsistency between actual state of affairs and the new policy on non-tolerance of official sector arrears,” the release said.

“Under the current circumstances, there are obvious concerns that lending into Ukraine’s arrears would send a discordant signal to all official sector creditors.”

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