Ukraine Faces Solvency Crisis And Likely To Default In July, Goldman Says

Ukraine faces a solvency and liquidity crisis and will likely miss a bond coupon payment in July and — as a result — will default on its debt, according to Goldman Sachs.

The Ukrainian government is unlikely to resolve a disagreement with its creditors on its debt repayment plan in the approaching weeks and will likely issue a moratorium before failing to pay its July 24 bond coupon payment, Goldman analyst Andrew Matheny said in a research note published on Wednesday.

“Ukraine will not make the July 24 coupon payment and, as a result, will enter into default at that point,” Matheny said in the note.

Ukraine has asked that its creditors take a 40 percent writedown in principal and accept new bonds that will be tied to its future economic performance under its repayment plan (a gross domestic product-linked instrument), however Goldman does not see the creditors accepting such a restructuring proposal.

“We do not expect the ad hoc committee to accept Ukraine’s latest restructuring proposal,” Matheny said.

Ukraine’s Finance Minister, Natalie Jaresko, is planning to meet with investors in Washington in the coming week as she weighs the potential damage from a default against future access to global capital markets.

Creditors own around $9 billion of Ukraine’s foreign-currency debt and have so far opposed the government’s terms after three months of ongoing negotiations.