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Russia may demand early repayment of $3 billion lent to Ukraine - government source

January 10, 2015, 10:24 UTC+3 MOSCOW
“Ukraine’s current economic and financial situation suggests that a number of parameters which are the conditions for granting Ukraine a Russian bonded loan are violated,” the source said
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Kiev, December 2014

Kiev, December 2014

© AP Photo/Efrem Lukatsky

MOSCOW, January 10. /TASS/. A whole range of parameters which are the conditions for granting Russia’s $3 billion bonded loan to Ukraine are being violated, a source in the Russian government said on Saturday.

“Ukraine’s current economic and financial situation suggests that a number of parameters which are the conditions for granting Ukraine a Russian bonded loan are being violated,” the source said, adding that: “Under these circumstances, it is likely that Russia will have to demand from Ukraine in the near future early repayment of the $3 billion debt.”

Commenting on the information, a government expert said: “It is true that one of the conditions for granting the Russian loan, which was put in writing, was that Kiev should observe a whole range of financial and economic parameters. And they are actually being violated.”

“This could provide the basis for demanding early repayment of the debt,” the expert added, describing Ukraine’s budget situation in general as pre-default.

Under the terms of the loan, which Russian extended in December 2013 in the form of a purchase of Ukrainian Eurobonds, Russia can demand early repayment if Ukraine's debt exceeds 60% of its gross domestic product.

Russian Finance Minister Anton Siluanov said in September that the Finance Ministry did not rule out that the bond's covenants might be breached in the third quarter.

The Ukrainian Eurobond issue prospectus includes covenants stipulating that Ukraine should meet all obligations on its sovereign debt on time. One covenant says the Ukrainian government should not allow its debt-to-GDP ratio to rise above 60%

“As calculations show and considering the hryvnia devaluation, the 60% debt to GDP level has been exceeded,” Siluanov said then, adding that the covenants would not be triggered automatically. “This will be our political decision, a decision by the Russian Federation. We’ll look after the covenant is triggered to decide on how to act further,” the finance minister said.

 
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