Ukraine Default

December 18th, 2015 6:14 am | by John Jansen |

Ukraine has defaulted on a $3 billion bond payment that it owes to Russia. I am hardly an expert on things Ukrainian but it seems that this is a much a political event as a credit event.

Via Bloomberg:
December 18, 2015 — 5:54 AM EST

Ukraine defaulted on a $3 billion bond payment due to Russia on Sunday, deepening a dispute over the debt as the two sides move closer to legal action.

Prime Minister Arseniy Yatsenyuk said Kiev is imposing a moratorium on the note due Dec. 20, which Russian President Vladimir Putin bought two years ago to bail out Ukraine’s former president just months before he was toppled. Russia said as recently as last week it would take Ukraine to court if the payment was missed. Yatsenyuk announced the payment freeze at a government meeting in Kiev on Friday.

Ukraine is defaulting after Russia refused to participate in an $18 billion restructuring with commercial creditors earlier this year, arguing it should receive better terms since it’s an sovereign lender. The two sides have indicated this month that they are open to negotiations to restructure the debt and have been using German officials to mediate indirect talks.

Kiev’s government is barred from paying Russia back in full under the conditions of the restructuring agreement with private creditors and a $17.5 billion IMF aid package secured this year to keep the country’s economy afloat. Relations between the two sides have deteriorated since the bond was sold as Russia annexed Crimea and supported a separatist rebellion in Ukraine’s easternmost regions that’s killed 9,000 people.

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