MOSCOW, August 16. /TASS/. International creditors of Ukraine, which essentially defaulted on its debt, could resell the debt to so-called vulture funds, which are known to have made many countries bankrupt, former Ukrainian Prime Minister Nikolay Azarov said.
"By refusing to pay off the loans, [Ukrainian President Vladimir] Zelensky forgets that financiers can resell Ukraine's sovereign debt to so-called vulture funds. Such funds previously ruined quite a few Latin American countries," he wrote on Telegram.
According to Azarov, who served as Ukrainian prime minister from 2010-2014, if this happens, it will mean that Ukraine's assets will be sold at a price that is many times lower than their nominal value.
"And this process will finally complete the loss of Ukraine's sovereignty," he said.
On August 3, the international rating agency S&P downgraded Ukraine's long-term credit rating to SD (selective default). The agency noted in its files that the Ukrainian government did not make the coupon payment on the 2026 Eurobond when it was due on August 1, 2024, and was not expected to come through with the payment during the grace period of 10 business days. On August 14, Fitch Ratings downgraded Ukraine's Long-Term Foreign-Currency Issuer Default Rating to RD (restricted default) from C.
The Ukrainian legislature earlier allowed the Ukrainian cabinet to suspend payments on foreign debt until it reaches a restructuring agreement with creditors and set October 1 as the deadline for the moratorium. In early July, lawmaker Nina Yuzhanina said Ukraine essentially defaulted on its foreign debt, but until that was formalized, the country continued restructuring talks with creditors. According to the Ukrainian Finance Ministry, the country's national debt amounted to $152.16 billion as the end of June.
Vulture funds are hedge funds that buy the sovereign debt of pre-default or in-default countries cheaply and then sue the debtors to demand full repayment, refusing to restructure payments. This jeopardizes countries' economic plans, ownership of natural resources and territorial integrity. Ecuador, Argentina, Peru, and Vietnam are among the countries that suffered from vulture funds in recent decades. More than 30 African countries had to deal with vulture funds because of bad debts, and the funds have won 75% of their lawsuits.