Ukraine's creditors have suggested a 20 per cent
haircut on billions of dollars of sovereign bonds as negotiations to
restructure the war torn country's debt near an end.
The haircut is the latest deal on the table as
the two sides attempt to meet the terms of the IMF's rescue plan for the
country by reducing debt held by private creditors by $15.3bn over the next
four years.
No deal has been signed but the proposal
indicates that both sides are willing to meet half way in order to secure an
agreement which could come as early as this week according to a person close to
negotiations, reports Elaine Moore.
Two weeks ago representatives from Kiev flew to
San Francisco, home city of Ukraine's largest creditor, Franklin Templeton, for
meetings that the country said represented the last chance to avoid default.
Kiev had been seeking a 40 per cent haircut from investors, who argue that the
country's debt could be made sustainable through maturity extensions and
without the need for any haircut.
However as fighting with pro-Russian separatists
in Eastern Ukraine increases and the country's economic situation deteriorates
international creditors have come under more pressure to accept a haircut on
their holdings.
The haircut could form part of a larger deal
that is likely to include maturity extensions, frozen coupon payments and a
form of debt instrument that would link returns to the country's recovery, such
as GDP-linked bonds.
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