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Putin Pans Ukraine's Debt Moratorium As "De Facto Default", Threatens Court

Tyler Durden's picture




 

In exactly a month, Ukraine will owe Russia a $75 million debt coupon payment. Finance Minister Anton Siluanov told reporters in Moscow today that "if they miss the payment, we will use our right to go to court." Then it got serious, as Vladimir Putin instructed Russian Prime Minister Dmitry Medvedev to assume control of Ukraine's repayment of its $3-billion debt in Eurobonds that Russia bought in 2013, slamming Ukraine's bill allowing them to impose a moratorium on foreign debt repayments as a de facto announcement of default. As one market participant warned, "I would wait until after June 20 to go forward with" any moratorium, as "if Russia takes Ukraine to court, that might be an incentive for other creditors to go down the same route."


As we previously noted, on Tuesday, Ukraine's parliament adopted a bill allowing Ukraine to freeze repayments of its foreign debt. As RT notes,

Experts agree that Tuesday vote meant a technical default for the country and would impede Ukraine’s ability to raise private investment from the EU and the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), a European source told TASS on Wednesday.

 

"Suspension of debt payments not coordinated with creditors results in a technical default, and in the case of Ukraine, it threatens to undermine Kiev’s ability to attract private investment through EU programs,“ the source said.

 

As part of the underpinning of Kiev’s bailout plan, the International Monetary Fund said in March that Russia would not receive the $3 billion bond repayment from Ukraine this year.

IMF is looking for cooperation from creditors to accept a restructuring on Kiev’s debt. That includes Russia.

“It is rather clear that the IMF is assuming that Russia’s $3 billion bond is included in this year’s $5.2 billion financing from a ‘debt operation’,” said Charles Blitzer of Blitzer Consulting and a former IMF staff member.

The IMF is avoiding the term ‘restructuring’ replacing it with ‘debt operation’.

Vladimir Putin is unimpressed, as Sputnik reports, blasting that Ukraine’s bill allowing to impose a moratorium on foreign debt repayments is a de facto announcement of default...

“This de facto announcement of a looming default demonstrates that the level of responsibility and professionalism [of the country’s leadership] appears to be low, despite the fact that the country is being ran from the outside.”

The bill, which is yet to be signed into law by the country's president, can be applied to Ukraine's payments on the $3-billion Eurobond issue bought by Russia in late 2013. However,

The Russian bond is governed by English law and any disputes related to it would be settled in an English court, according the bond prospectus.

 

The bond has a covenant allowing the holder to demand its money back if Ukraine’s public debt tops 60 percent of economic output, which the IMF said took place last year.

 

“At the request of our Ukrainian partners and the IMF, we are not using this right as we do not want to aggravate the already difficult economic situation of our partners and neighbors,” Russian President Vladimir Putin said at a government meeting in Moscow on Wednesday.

 

However, I would like to understand what our partners plan to do.”

And so far, as Bloomberg notes, Ukraine has failed to bring Russia to the table as it begins negotiating with creditors to reduce its $23 billion of international debt.

Russia says the $3 billion bond that comes due in December shouldn’t be included in the restructuring because it was bought from the regime of former Ukrainian President Viktor Yanukovych as part of a government aid agreement.

 

Failure to cut a deal risks future tranches of a $17.5 billion International Monetary Fund loan that Ukraine needs after a conflict with pro-Russian separatists pushed it into the worst recession since 2009.

“Our goal is to find an outcome that is acceptable for the Russian Federation,” Putin said during a meeting with government members.

*  *  *

In conclusion this is far from over...

“If Russia takes Ukraine to court, that might be an incentive for other creditors to go down the same route,” Jakob Christensen, an economist at Exotix Partners LLP in London, said by phone on Wednesday. “I would wait until after June 20 to go forward with” any moratorium, he said.

 

Furthermore, as we have noted previously, Ukraine’s biggest creditor is Franklin Templeton, which along with three other companies owns $8.9 billion of the nation’s debt (where a knife-catching bond manager was exposed as a glorified BTFD'er).

The nation’s debt levels are “unsustainable” and there is “no alternative” for creditors but to accept maturity extensions, coupon reductions and principal writedowns on their holdings, Ukraine's American Finance Minister Natalie Jaresko said on Tuesday.

“I wouldn’t assume that Ukraine is not willing to default on the Russia bond,” Anna Gelpern, a Georgetown University law professor and fellow at the Peterson Institute for International Economics, said by phone on Tuesday. “They’ve said that they want to restructure them on the same terms as everybody else.”

 

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Wed, 05/20/2015 - 21:40 | 6115738 Took Red Pill
Took Red Pill's picture

and checkmate (while Obama plays checkers)

Wed, 05/20/2015 - 21:43 | 6115748 NoDebt
NoDebt's picture

Obama EATS the checkers.  And he still can't figure out why the red ones don't taste any different than the black ones.

Wed, 05/20/2015 - 21:53 | 6115774 Paveway IV
Paveway IV's picture

Can't squeeze blood out of a failed state (Nuland has been drinking most of it herself).

Ukrainian gold was pilfered and hauled off to New York last year - no chance of anyone touching that.

Maybe when the Nazis kill Porky and Yats in the upcomming coup, they can harvest their organs and sell them on eBay.

Wed, 05/20/2015 - 22:01 | 6115800 Latina Lover
Latina Lover's picture

The Ukie coup government is playing from a position of extreme weakness.  Russia can and will seek restitution from the English courts.  Moreover, the english government will not interfere with the English courts to please the Ukies, or even the USSA. Screwing Russia for a  3 billion dollar bond would severely damage confidence in the mult trillion dollar English Bond market.  The Ukies are just not worth it.

Wed, 05/20/2015 - 22:18 | 6115851 Freddie
Freddie's picture

Isn't London also vying for the yuan bond market plus the Eurasian trade zone financing deals in the future?  china will not want to see Russia get stiffed. 

On the flip side - didn't Argentina essentially stiff bond holders and after time got access to sell bonds again?

Thu, 05/21/2015 - 00:28 | 6116206 ThirteenthFloor
ThirteenthFloor's picture

Freddie - Argentina was different, she only refused to pay when the original interest terms were changed significantly upward by US courts. She was willing to pay original debt at first agreed to rates. Vulture funds raised interest upward post agreement.

Ukraine just wants to not pay Russia in favor of other debtors, as I read this. Putin is claiming first in line at the default/bankruptcy.

Thu, 05/21/2015 - 08:03 | 6116687 SWRichmond
SWRichmond's picture

“This de facto announcement of a looming default demonstrates that the level of responsibility and professionalism [of the country’s leadership] appears to be low, despite the fact that the country is being ran from the outside.

Hey Vlad, I got some news for you: nobody gives a flying fuck about "rules" anymore, we are well into the "do as thou wilt" phase of this breakdown.  The US Fed defaulted on USD when it printed $4Trillion.  ECB defaulted with LTRO.  Ukraine is just ahead of these, as their currency has already tanked and printing more now would just initiate a hyperinflation.  How US and ECB are still considered "solvent" is simply an artifact of a gentlemen's agreement among sociopaths.

Wed, 05/20/2015 - 22:21 | 6115855 Anunnaki
Anunnaki's picture

Ukis aren't worth it, but punishing Putin might be worth it. I agree though that money talks and bullshit walks. Obama can't impose his whims and it must be killing him to see Putin have the upper hand again

Wed, 05/20/2015 - 22:56 | 6115987 Slarti Bartfast
Slarti Bartfast's picture

You'd think Obama would be getting used to it by now.

Thu, 05/21/2015 - 00:27 | 6116209 junction
junction's picture

Amazing, Putin is now the last capitalist.

Thu, 05/21/2015 - 02:47 | 6116366 Bioscale
Bioscale's picture

Yeah, he should rather bomb them because it works much better..

Thu, 05/21/2015 - 00:19 | 6116189 Stumpy4516
Stumpy4516's picture

"checkmate"  How so?  What actual, real action has Putin taken.

He has shown the west to be clowns and he may cause the US taxpayers to foot the bill for WUke.  But how is that checkmate?

Besides, those US dollars are just digital computer created dollars created out of thin air. 

Talk, talk.

France has refused to deliver Putin's ships.  A slap in the face.

Putin gets moral points for acting like he is using the authorized legal system.  Just how is that going to work out in reality?

Oh, and Putin refused to deliver on a fully signed contract to sell missiles to Syria and Iran.  No high moral ground there.

Those on ZH said scary Putin would use force in response.  Never against the US or NATO supported countries.  He just is not scary to anyone.

Now China, they take some action close to home.

Thu, 05/21/2015 - 07:40 | 6116669 Took Red Pill
Took Red Pill's picture

John Kerry and US throw in the towel on Ukraine;

http://www.salon.com/2015/05/19/john_kerry_admits_defeat_the_ukraine_sto...

I'd call that checkmate

Thu, 05/21/2015 - 10:26 | 6117164 Stumpy4516
Stumpy4516's picture

Someone at salon wrote a story, filled with words.  Meanwhile military hardware, advisors and troops from NATO countries flow in.

It is good to read the stories, to see if they reflect reality.  At this time nothing has been "given up" and the resources of war have been flowing into WUke.

It's funny, the story is the US/Israel have given up while the war machine advances in real physical terms and on the other hand the story is that Putin is advancing when in real physical terms he forces the EUke's to agree to cease fires and to allow the WUke's to retreat safely twice (so they can then attack the EUke's again).

So this is how Putin is the chess master.  Redefine winning and checkmate.

Thu, 05/21/2015 - 17:47 | 6119174 Took Red Pill
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that's not the only source for the story. It's all over the internet. Google it.

Thu, 05/21/2015 - 01:41 | 6116307 robertsgt40
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Turn off the spigot and see who gets paid first ;-)

Wed, 05/20/2015 - 21:42 | 6115746 NoDebt
NoDebt's picture

If only Greece had Rusian gas pipelines across it, they might have some leverage to get help from the European "union" and other western powers (<cough> US <cough>) as well.  

Who's screaming at Ukraine that they need to accept a "program" and institute austerity measures?  Nobody.

Wed, 05/20/2015 - 22:48 | 6115907 Freddie
Freddie's picture

http://thesaker.is/the-women-of-the-dpr-gru-spetsnaz/

Women of Donetsk fighting against dual shit-i-Zen Porky, Yats and Nuland's criminal junta in Kiev.

Brave and honest women. 

Here is more:
http://www.liveleak.com/view?i=612_1431975128

Contrast these brave NovoRussian ladies to shit like the Kardashians and crap you see in Wal Mart of all races who are shopping in EBT retailer.  The people in NovoRussia may not be wealthy with plastic Chinese shit from Wal Mart or cars bought on credit but they are proud and real people.

Fri, 05/22/2015 - 00:07 | 6120117 pparalegal
pparalegal's picture

Just a guess. Joe Biden and his kid have signed you up to help. Them.

KIEV (Sputnik) – The United States will sign a loan guarantee for $1 billion later in the day with Ukraine, the Ukrainian Finance Ministry’s press service said Monday.

“Today, May 18, at 5:00 p.m. [14:00 GMT], the official signing ceremony on the agreement of allotting credit guarantees between the government of Ukraine and the United States will take place,” the ministry said in a statement.

Finance Minister Natalie Jaresko will sign the agreement on behalf of Ukraine, while the US government will be represented by US Ambassador to Ukraine Geoffrey R. Pyatt and USAID's Ukraine director Jed Barton, according to the ministry.

Wed, 05/20/2015 - 21:44 | 6115751 Omen IV
Omen IV's picture

Nuland should write a check for her boys

Wed, 05/20/2015 - 21:58 | 6115795 Freddie
Freddie's picture

They probably will and American taxpayers will get screwed.  The NeoCon Evangelicals over at Free Republic web site hate Putin and love Porky/Bibi/Yats just like all of Congress which is owned by you know who.

Bibi gives a 5 minute speech in Congress and gets 300 standing ovations.

Wed, 05/20/2015 - 22:16 | 6115847 Anunnaki
Anunnaki's picture

How to make sure Putin gets stiffed while other creditors get paid

Thu, 05/21/2015 - 00:41 | 6116226 TheFourthStooge-ing
TheFourthStooge-ing's picture

Nuland cookies apparently kill well the taste of shit.

Wed, 05/20/2015 - 21:48 | 6115752 shovelhead
shovelhead's picture

It might be a cold winter for customers on the other end of the Ukie gas pipelines unless some guarantees are put in place.

Putin could decide that Gazproms assets are 'systemically important' to Russia.

Wed, 05/20/2015 - 22:14 | 6115842 Anunnaki
Anunnaki's picture

I love how Putin always refers to his sworn enemies as partners while at the same time linking Obama through Jarecki as being responsible for the inept clown college that is the Chocula gov't

You broke it you bought it, Peace Prize

The goal: how to give Lemonhead a haircut winile cushioning the blow for the dipshit American hedgers who are desperate not to take any haircuts

You know they will try to go the odious debt route on the $3 bil bond since it was done under Yanukovich

Thu, 05/21/2015 - 02:47 | 6116367 Volkodav
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Yanuk was lawfully elected President.

Wed, 05/20/2015 - 22:27 | 6115881 WTFUD
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' it is unusual for a person who started a fire to be involved in the fire-fighting effort'

on Nuland's visit to Moscow ( and what it wont entail )

Wed, 05/20/2015 - 22:29 | 6115892 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Surely Putin knows he won't get a thin dime out of Kiev till the Russian flag is hoisted over Frankfurt?

Wed, 05/20/2015 - 22:31 | 6115896 Niall Of The Ni...
Niall Of The Nine Hostages's picture

(duplicate deleted)

Wed, 05/20/2015 - 22:38 | 6115928 Omega_Man
Omega_Man's picture

cheaters

Wed, 05/20/2015 - 22:39 | 6115929 williambanzai7
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Then all the creditors can proceed to sieze the Ukraine and sell it's contents in a shitty outdoor market in East Warsaw.

Thu, 05/21/2015 - 02:00 | 6116327 Gavrikon
Gavrikon's picture

What?  They aren't doing that already?

Wed, 05/20/2015 - 22:52 | 6115944 Freddie
Wed, 05/20/2015 - 23:20 | 6116042 WTFUD
WTFUD's picture

Bravado on Cookie Lady quickly evaporated on The Crimean Cascade.

Hunter Biden , a few templars er Templeton's and some other assorted opportunistic parasitic muppets got culled.

Thu, 05/21/2015 - 02:44 | 6116361 Volkodav
Volkodav's picture

yes

Wed, 05/20/2015 - 23:21 | 6116044 kchrisc
kchrisc's picture

Putin is whipping Zion's ass.

Because of that, history informs us that there will be hell to pay by we goy--war.

Liberty is a demand. Tyranny is submission..

Wed, 05/20/2015 - 23:36 | 6116081 WTFUD
WTFUD's picture

What i worry about kchrisc is whether Putin (China) can go for the jugular and not allow these fuckers a timeline to rebuild with fake temporary promises.
This shit show has to end.

He's been trying to appease these bastards for years through this and that union ( eg nato ) and been thwarted at every hands across the sea gesture.

What i'm asking is ' Can WE expect Hope and Change' in our lifetime OR are the whole nine yards just a changing of the oligarch (colour)?

Thu, 05/21/2015 - 03:21 | 6116403 Charming Anarchist
Charming Anarchist's picture

Playing along with the statist meme, YES, Putin (China) can go for the jugular but they got to smoke the bloody rats out into the open. Time is on their side.  As supply chains break down, the stages supporting the upper echelons of the pyramids crumble. 

Going to an English court is objectively a delay tactic forcing all sides to avoid war. If Putin (China) can keep a lid on domestic agent provocateurs, then it looks as close to CHECKMATE as you can get, I reckon. 

Thu, 05/21/2015 - 04:55 | 6116478 kchrisc
kchrisc's picture

My concern is that they are to some degree both paying Zion's game. This is evident when one considers that Putin/Russia has not gone "gold for BTUs" yet, and neither has announced that war against them, or their allies, means Israel gets it "first and hardest."

We will see.

Liberty is a demand. Tyranny is submission.

Wed, 05/20/2015 - 23:34 | 6116074 QQQBall
QQQBall's picture

risks future tranches of a $17.5 billion International Monetary Fund loan that Ukraine needs after a conflict with pro-Russian separatists pushed it into the worst recession since 2009...

 

So its all Russia's fault? These meme just keeps getting recycled.

Thu, 05/21/2015 - 00:29 | 6116203 indaknow
indaknow's picture

I'm starting my debt moratorium tomorrow, let's see how far I get.

Oh and unlike Greece I've kept some dry powder available.

Thu, 05/21/2015 - 01:59 | 6116325 Gavrikon
Gavrikon's picture

Porkyshenko could stop murdering Russians in the Donbass.  That'd be a good start.

Thu, 05/21/2015 - 02:44 | 6116363 vincenze
vincenze's picture

Essentially, the pro-US Ukrainian government wants to default and sell everything valuable to US billionaires.

Then, the current government will be replaced by new US puppets who will blame all problems on the current government. Ordinary Ukrainians will be screwed.

Thu, 05/21/2015 - 02:48 | 6116368 Bioscale
Bioscale's picture

They already are screwed, the worst is just coming.

Thu, 05/21/2015 - 06:55 | 6116599 wstrub
wstrub's picture

They don't print interest when they print money............

Thu, 05/21/2015 - 07:58 | 6116700 localizer
localizer's picture

There's a theory that the oligarchs decided to default to grab the resulting cheap assets for peanuts... all about asset grabbing at this point, there's still a lot up for grabs there - public companies, land is going off to Arabs, Chinese and other foreigners as we speak! Oh boy, what "democracry" and "European values" the Ukrainian people are getting... what a clusterfuck... Ukraine is being looted and asset stripped on a massive scale now. Corruption has reached epic proportions even compared to the "horrible" Yanukovich times... 

Thu, 05/21/2015 - 08:02 | 6116714 DutchBoy2015
DutchBoy2015's picture

The ZioNazi cunt Nuland has moved on to Macedonia which will soon be a fuckign inferno.

Its time to hire some Chris Kyle trained snipers and start taking out these ZioNazi cunts one by one by from 1500 yds.

 

Thu, 05/21/2015 - 08:04 | 6116716 DutchBoy2015
DutchBoy2015's picture

Nothing would be better than to see Nuland and McCain's heads explode on LIVE TV from 1500 yds at one of their cookie handouts.

Pay per View revenue thru the roof.

Thu, 05/21/2015 - 08:11 | 6116728 DutchBoy2015
DutchBoy2015's picture

Putin needs to expose the illegal organ harvesting by the Kiev ZioNazi Porko shenko and YATS the RAT.

Then Putin also needs to expose the Ramstein and Incirlik heroin trade from Afghanistan being carried out by CIA and US military.

Thu, 05/21/2015 - 09:16 | 6116931 Mike Masr
Mike Masr's picture

Fuck Porkyshenko and all the banderist Nazi's in Kiev and fuck the EU!

Thu, 05/21/2015 - 09:37 | 6116982 Mike Masr
Mike Masr's picture

Good story!!

Donetsk: A Defiant and Besieged City

http://www.truth-out.org/speakout/item/30740-donetsk-a-defiant-and-besie...

 

 

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