ZN.UA
Even as Ukraine’s negotiations with creditors over a potential restructuring of the country’s debt remain at a deadlock, some investors have recently bet on the conflict-torn country’s bonds.
Pioneer Investments Management Ltd., which oversees $241 billion in assets, has been buying Ukrainian eurobonds and is waiting for some weakness in the securities before adding to its positions, according to Yerlan Syzdykov, head of emerging markets at Pioneer Investments in London, Bloomberg reported.
While he expects further disagreement between Ukraine and its creditors, and maybe even a temporary freeze on debt payments, he is betting the two sides will eventually agree on a 15% principal writedown in September.
Though the negotiations have dragged on, there has been renewed optimism of a deal recently.
“There’s still going to be plenty of negative news on the market and potentially the moratorium itself that will give us a better chance to add to our positions,” Syzdykov said.
Still, with another key bond payment due in September—for $500 million—some investors say it is still too early to buy in.
Ukraine has threatened to announce a moratorium on debt payments before a $500 million bond falls due next month amid disagreements with bondholders on the principal reduction. Ukraine has called for a 40% so-called haircut on the bonds, while the creditor group owning $8.9 billion of the nation’s debt has insisted such losses are not necessary to comply with terms of an IMF bailout program.
“The government realizes that a 40% haircut is not something they will achieve,” Syzdykov said.
“The train has left the station: the major stumbling block of the demand of no haircut has been taken off the table,” he said.
His prediction of a 15% cut to face value compares with a median estimate of 22.5% in a Bloomberg survey of 15 economists.