AT FIRST sight, it was a triumph. After months of negotiations Ukraine and a committee of its creditors (which include Franklin Templeton, an American investment house and BTG Pactual, a Brazilian one) reached a deal this week to restructure the country’s international bonds, as well as a smattering of other sorts of debt, worth about $18 billion. Payments have been pushed back, meaning that the government will not need to cough up any principal or interest on the debts in question until 2019. The principal on the bonds will also be cut by 20% on average.
This is a better deal for Ukraine than many were expecting. It is rare for a country to get a haircut on its debts without also defaulting (one exception is Greece). When the negotiations began, the creditors had refused even to consider writing off any of the country’s debt, arguing instead that delaying repayment alone would be enough to right Ukraine’s finances. The Ukrainian government’s repeated threats to declare a moratorium on debt repayments—a default by another name—may have helped soften their stance. (That it did not have to follow through will help Ukraine...Continue reading
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