Ukraine

In a related story, the Irish Times reported that Ukraine’s economy exited 1 1/2 years of recession last quarter, reaching a milestone toward what officials predict will be a drawn-out recovery. Gross domestic product rose a preliminary 0.7 per cent in July-September from the previous quarter, the State Statistics Office said Monday, buoyed by a modest industrial revival and relative peace in the nation’s east. The annual decline eased to 7 per cent from 14.6 per cent in the second quarter and as high as 17.2 per cent in the first.

Ukraine’s Western allies are preparing to accelerate planned changes to the International Monetary Fund’s lending policies to prevent Russia from stymieing the country’s $25 billion financial rescue package, The Wall Street Journal reported. Ukraine’s economy has suffered drastically over the past year or so, in large part due to a still-simmering conflict with Russia-backed separatists in the east. The Kremlin has rejected Ukraine’s invitation to participate in a debt restructuring, and Kiev has said it won’t be able to pay all of the $3 billion due to Moscow by the end of the year.

A legal fight is looming over a $3bn bond owed by Ukraine to Russia after Moscow refused to join other bondholders in a debt restructuring and both sides said they were prepared to take the matter to court, the Financial Times reported. Russia emerged on Thursday as the lone holdout in the $18bn restructuring deal offered by cash-strapped Kiev — involving a 20 per cent writedown on the value of its debt and extended repayments — which other private shareholders voted to accept.

The Fitch rating agency has cut Ukraine's foreign currency rating to restrictive default after Kiev failed to repay $500 million in Eurobonds on September 23. A ‘restrictive default’ Fitch rating indicates a failure to pay on a bond, loan or other material financial obligation without entering bankruptcy or ceasing operations. The Fitch’s downgrade comes after a similar move from Standard & Poor’s that downgraded Ukraine’s credit rating to 'selective default' on September 25.

Ukraine must resolve outstanding budget issues before the International Monetary Fund gives the green light on the next payout of bailout cash, the IMF said Saturday as it further cut its economic outlook for the conflict-beleaguered nation, The Wall Street Journal reported. IMF mission chief Nikolay Gueorguiev said Kiev’s pro-West government had reached agreement with the IMF on most of the budget and policy overhauls needed to complete the latest review of the emergency loan program.

International financial institutions, led by the World Bank, are patching together a $1 billion financing package to help Ukraine and its energy giant OAO Naftogaz to fill up its natural gas-storage facilities and avoid shortages in the conflict-ridden country and the rest of Europe over the winter, The Wall Street Journal reported.

Ukraine says it will halt paying off its external debt on Wednesday, facing the risk of a technical default. The list of non-payments doesn’t include the $3 billion owed to Russia, RT.com reported. The debt to Moscow is due in December which Russia has insisted it wants in full. According to a document published on the website of the Ukrainian government, the restructuring applies to the $3 billion Eurobonds purchased by Russia. However, payments on them have not been suspended. The list included seven issues of Ukrainian government bonds.

In a related story, Bloomberg News reported that a committee of credit-default swaps traders said that Ukraine’s decision to freeze bond payments may trigger payouts on contracts insuring against losses on the country’s debt. The ruling is the first step toward a so-called credit event that would allow the settlement of about $396 million of the derivatives contracts, the International Swaps & Derivatives Association said on its website Wednesday. Ukraine would have to actually miss the payment before any final decision is made, the group said.

Ukraine’s central bank declared a top 10 bank insolvent that is majority-owned by multimillionaire Kostyantyn Zhevago and where his London-listed Ferrexpo – the nation’s largest pellet exporter – has $174 million, or 62 percent, of its deposits, the Kyiv Post reported. At close of business on Sept. 17, the National Bank of Ukraine took the bank, the nation’s 10th largest by assets, into receivership after Zhevago failed to contribute liquidity, mainly by not repaying related-party loans to the bank by selling his non-core assets.

Ukraine’s parliament on Thursday approved an $18bn debt restructuring deal despite fears that a populist backlash against the proposals would jeopardise the vote, in turn plunging the war-torn and recession-battered country into an imminent default and deep political crisis, the Financial Times reported. A comfortable majority of MPs supported a package of measures sanctioning the debt deal, including a 20 per cent “haircut” or writedown for creditors.