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. Last Updated: 07/27/2016

Ukraine Avoids Default on Bonds




LONDON -- Ukraine escaped a huge Eurobond default Wednesday after enough investors accepted a complex $2.6 billion bond restructuring plan, scrutinized by markets as a possible model for debt workouts in other countries.


The near bankrupt former Soviet republic garnered the required 85 percent approval needed for the deal to go ahead after banks and retail investors agreed to exchange short-dated Ukrainian foreign debt for new seven-year Eurobonds.


The swap gives Ukraine vital time needed to push through privatization and other economic reforms. It also paves the way for resumption of a $2.6 billion loan program the International Monetary Fund stopped last year.


"This is great news. This type of transaction has never been done before," said Alex Seippel of the Roundstone Group, which advised Ukraine on the transaction.


Ukraine is the third country after Pakistan and Ecuador that the IMF has encouraged to restructure its private sector debts.


But Ukraine's deal is unusual in that around half its creditors are highly dispersed retail investors, as opposed to banks. Adding to its complexity, the five bonds included were also covered by different documentation and jurisdictions.