WSJ: Ukraineʼs foreign creditors want to resume payments on the national debt as early as 2025

Foreign bondholder companies, including BlackRock and Pimco, plan to pressure Ukraine to start paying interest on its debt again next year.

The Wall Street Journal writes about this with reference to sources.

The group, which holds about a fifth of Ukraineʼs $20 billion in outstanding Eurobonds, recently formed a committee and hired lawyers and bankers to negotiate.

Creditors want Ukraine to strike a deal to resume payments in exchange for writing off much of the countryʼs outstanding debt. Some of the groupʼs bondholders discussed these plans with senior officials in Kyiv.

According to the publication, Ukraine is preparing to start negotiations with bondholders this month, and Kyiv advisers are working to involve the governments of the United States and other countries.

At the same time, the US and its allies are concerned that taxpayer money will end up in the hands of bondholders if Ukraine resumes any debt service. The countries agreed to give Ukraine a debt holiday worth about $4 billion of its own loans until 2027 and expressed concern that bondholders could start receiving payments earlier than they do.

The WSJ says that without a deal, Ukraine could default after the debt holiday ends in August.

Bondholders hope to receive up to $500 million in annual interest payments after agreeing to write off the debt. They have made it clear that they may be willing to provide further debt relief at a later date.

Some bondholders have offered to use frozen Russian assets in Europe and North America to pay off some of the debt. The IMF and some G7 countries do not yet support the idea, but have said they could support lower interest payments through 2027 — at rates well below market rates.

• In August 2022, the owners of Eurobonds agreed to a two-year postponement of payments and their repayment terms. Ukraine has reached such an agreement regarding almost 75% of the total principal amount of securities in circulation. Most of Ukraineʼs creditors have suspended payment obligations until 2027.
• In October 2023, Reuters reported that Ukraine was discussing with foreign bondholders plans to restructure $20 billion in debt and the possibility of raising new financing.