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As Ukraine Launches A Debt Restructuring, Is Russia About To Become A "Holdout" Activist Investor?
With Argentina suddenly no longer able to kick the can any longer in its decade long fight with holdout investors, and warning that unless the covenants of the foreign law bonds are stripped in effect making them local-law bonds (and undergoing an event of default for CDS purposes), everyone is focusing on how soon until the sovereign default parade will again resume, following the Greek technical bankruptcy two years ago. Yet the next sovereign restructuring may not come from Argentina first, but from the Ukraine, which as Reuters reports is holding talks with creditors on the restructuring of its foreign debt. Unfortunately for the country, this attempt at a "voluntary" restructuring is coming at the worst possible time.
From Reuters:
Ukraine is holding talks with creditors on restructuring its foreign currency debts, an official from an international finance association said on Thursday following recent meetings with Ukrainian officials.
Lubomir Mitov, an economist with the Institute of International Finance, said that while Ukraine's finances were precarious, it was too soon to say whether it would need to change the terms of its debt.
Mitov said Ukrainian officials stressed they would avoid forcing any so-called haircuts on bondholders in a restructuring.
Taking a page from the Greek playbook, Ukraine is fixated on making it quite clear that creditors would be, make that should be, unanimous in agreening to a restructuring. Which is clear: as the endless days of Greek bondholder negotiations taught us, the inability to have the vast majority of holders agree on a change in bond terms, i.e., a restructuring, would mean an event of default.
"The Ukrainians authorities made very clear to us that they would consider this only as a really, truly voluntary operation agreed by the bondholders," Mitov told journalists by phone. "A voluntary exchange or maturity extension could be one of the sources for financing."
Basically, the only question is whether the restructuring of insolvent Ukraine which has lost its industrial eastern regions to "separatists" and is no longer capable of servicing its existing debt, takes place during a sovereign default or without one, allowing the country to seamless continue its existence as if it was the country that issued the original bond, under the original conditions (hint: it isn't).
Alas, this attempt to renegotiate its bonds comes at the worst possible time because just this week the US Supreme Court gave a green light to "voluntary" exchange offer holdouts everywhere to demand priority treatment when holding out from to such "enforced" exchange offers as what Argentina did back then... and what Ukraine is trying to do now.
So absent some major "carrot", most likely coming from Uncle Sam, we wouldn't be surprised if Ukraine was unable to find even a simple majority of participants that would agree to the terms of its exchange offer.
Which leads to another question: which will be the fulcrum Ukraine security, and who will be the vulture investors - here the usual suspect Elliott comes to mind - preparing to "hold out" and scuttle the deal, demanding a pound of flesh in exchange for not holding out.
For now the answer is unclear, which is why once the Reuters news hit, Ukraine bonds tumbled:

But what will make the Ukraine restructuring fascinating is if the "activist" bondholder investors, aka vultures, aka holdouts, are not your usual hedge funds, but none other than the Kremlin, which after accumulating a sufficient stake to scuttle any prenegotiated, voluntary transaction can demand virtually anything from Kiev in order to allow the country to make the required adjustments on its bonds to avoid an outright sovereign default.
Because who else can't wait for Putin Capital Management LP?
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Ukraine is using armor with infantry formations now.
That's looking less and less like a Civil War and more and more like a real war by the day.
Given Europe's catastrophic economic state it's easy to see large numbers of "technicals" starting to gradually flow into the region. this is some of the most valuable real estate in the world.
Of course the Ukrainian government is going into total warfare mode, since they are puppets of the US State Department and CIA, in turn manipulated by Multinational Oil and Agricultural companies, further controlled by the NY and London Banksters.
Bonds will be just one of many tactics Russia will use to put pressure on Kiev. Ultimately, the Ukraine will fail, especially with the loss of Donestsk and Lugansk, the chief income generators for the Kiev Kriminals.
Ukrainians can burn the worthless bonds this winter after their gas supply runs out. It is going to be cold!!!!
Actually, if the Ukrainian government was really representing the Ukies, they would default on all debt, screw everybody and start afresh. Of course this means that Oligarchic wealth would be largely vaporised, so this will never happen under the Porkyschenko Fascists.
How is it even possible that Ukranian bonds are trading even close to par.
What a farse this is.
Any Market of Interest to the USSA is 'managed'.
Porkyschenkos Nuts are in the Russian Vice, and Putin is turning the handle, slowly, relentessly....
Didn't the IMF already accept Ukraine's IOU (a protracted civil war)?
Just have the CIA put it on their AMEX Black (ops) Card.
Someone is eating bad mushrooms again.....
http://www.reuters.com/article/2014/06/19/us-ukraine-crisis-fighting-idU...
"these are no mushrooms." pushing daisies more like it. we're well past the point of finding "political solutions." pipelines are being blown up all over the place now.
"Long the Koch Brothers." They're talking about 300 million for the election cycle...a truly staggering number. "There is a point where you are buying the Government itself."
Is there such a thing? Putin's magic mushrooms sound pretty tasty to me. Of course the US thinks it can "win" a nuclear war with Russia. So who exactly is eating the shrooms around here?
US thinks it can "win" a nuclear war with Russia.
NO one wins in a nuclear war. That is why there will never be a major one.
Yes. My son was the result of a minor pregnancy because I forbade my wife from having a major one. Imagine what would have happened if she had.
Real wars do often start with economic ones, don't they?
Nothing new to see here, just history running in circles again.
You guys just can't learn the lesson.
No financial event that can threaten anything systemic will be allowed to happen. Argentina matters to no one.
Ukraine may or may not matter, depending on the swaps profile.
If they do matter and Russia tries a holdout strategy, legislation will be approved changing the rules on the relevant bonds after the fact to render Russia powerless. This happens with approval of the EU, BIS and anyone else you need to approve it.
I repeat: Forget money and financial stuff as the vehicle of destruction. If you didn't learn that in Greece, learn it now.
Only oil can (and will) take the system down. All other threats can be undone by decree. If you think TPTB will let the system unravel because someone is going to lose some money on bonds, you're just delusional.
Only oil matters.
Mmm, Russia has the oil and the gas, and is now trading it in other than dollars.
Please Russia has written off paper promises from Ukraine. War is in fact a negotiation by other means...
same as it ever was.
see below and "kinetic energy" includes speed as well as mass.
http://www.youtube.com/watch?v=VNCUeItvovs
these things can get out of control really fast...as Germany found out in World War II technical mastery is far from sufficient.
And again...for the record...i have not supported the diplomatic approach as there really is a lot worth fighting for in that region which in "real world speak" means you can get a war all too easily over there. "The history is horrific" to say the least.
http://en.wikipedia.org/wiki/Battle_of_Kiev_(1941)
Optimist. There isn't any energy (calories) or motivation for anyone to actually do shit, let alone "kinetic energy".
Fuck, for many people all over the world there is a war every day. Every been to south central L.A.?
same as it ever was....
russia is one of the biggest bond deadbeats in history
You're just jealous the rest of the world allows Russia sloppy seconds (fifth's?) and your still underwater and unable to refi your mortgage, yet you still pay the damn thing on time. /sarc
if i'm jealous it is because i can't ipo my brain child hedge fund ibuyshit.com and make a multi billion dollar bonus. sucks donit?
Putin : 1102
Gay Prince: 0
Kiev: "Accept the restructure Russia or we wont buy any gas from you anymore !"
Seems the real "Domino Theory" is about to become a reality.
Our very own Supreme Court has destroyed the incentives to negotiate on these bond restructurings. In a world of debt, the unintended consequences will be severe.
No Everlasting Gobbstoppers from the Chocolate King ?
Reality.
It looks like Putin is HUYLO!
Hey, retard, time to learn a new trick.
Kiev may try and look proud now, but come winter and no energy... as I have said before, this ends the way it did for Hitler and Napoleon.