Due to Russian investors IUD gets further deferral of debt repayment

Ukrainian corporation Industrial Union of Donbass (IUD) whose controlling stake was recently bought by consortium of investors managed to persuade its creditors to allow it to pay only interest on its debt of USD 3.3 bn until March 2010. Such an agreement was in place till the end of the 2009, however, former owner of the controlling stake Sergei Taruta could not manage to persuade creditors to prolong the agreement. It is said that the new agreement with creditors was mainly achieved due to Russian businessment that enter into the investment consortium that owns controlling stake in IUD

Structure of Ukraine's debts

The Y axis - mln USD
Blue - Corporate debt
Orange - Sovereign debt
Greenish - Banks
Source

Interpipe fails to pay on Eurobond coupons

UR has written earlier about Interpipe's problems with its creditors. On February 5 Interpipe's Eurobond owners were waiting for the coupon payment, which have never materialized. The tranche on July 2007 $200 mln Eurobond issue should have amounted to $8.75 mln. Now the repayment of Eurobonds themselves, which is planned for August 2, 2010, is under threat.

It is rumored that most of the Eurobond issue belongs to Interpipe now and that non-payment of the tranche is a method of pressuring other Eurobond owners to agree for debt restructuring, once Interpipe offers it.

Creditor's of Ukraine's defaulted banks can expect 40% recovery

Standard & Poor's Ratings Services said today that although recovery rates for creditors of defaulted banks in Kazakhstan, Russia, and Ukraine (KRU) have historically been muted, they could improve with support from the state.

"We believe that recoveries could be restricted and unpredictable, largely because of limited bank supervision and what we see as arbitrary frameworks for bankruptcy and bank restructuring in KRU," said Standard & Poor's credit analyst Sergey Voronenko. "In our view, this situation may be exacerbated by the approach of the banks' management and what appears to be asset stripping before default, as has been alleged in some recent bank liquidations. These aspects together with other factors have historically constrained our ratings on KRU banks."

"We expect the average recovery prospects for creditors to be less than 40% through the cycle, with strong disparities in individual cases," added Standard & Poor's credit analyst Ekaterina Trofimova. "This is despite some progress, most notably in Russia, from the previous decade. Recoveries may be even lower in 2010 and 2011, owing to the likely continuation of weak economic conditions in KRU.”



Source

Ukraine's debts - main risk of 2010

Ukraine's obligations both government and corporate on short-term debts in 2010 is about $20 bn. Same obligations on long-term debts in 2010 is $10 bn. Therefore, overall Ukraine should pay off $30 bn in 2010. Thus the magnitude of default in the country totally lies with creditors. In their turn creditors will assess the situation in Ukraine depending on the power change in the country. Ukraine's presidential elections will slowly move into local elections and then there is a risk of Autumn re-election of the parliament. Therefore, 2010 promises to be a difficult year for Ukraine both politically and financially. Source.

Ukraine's probability of default on sovereign debt accoring to CMA Datavision is lower only to Venezuala, and both countries have probabilities of default above 50%. Source.

Fitch downgrades Interpipe rating to Restricted Default

Fitch downgraded Interpipe Limited long-term default rating to ‘RD’ on Dec 18. Lowered ratings of the company are due to lack of understanding between the company and creditors as well as with Eurobond holders ($200 millions outstanding).

Fitch sees a considerable risk that Interpipe can default on paying back the loans once the period of extension agreed with the creditors runs out. Further postponement of payments should be agreed upon in January 2010 and Fitch expects these negotiations to be difficult.

Overall Interpipe owes $900 million at the end of the III quarter 2009. In September it was announced that Interpipe will seek additional financing from Barclays Capital and Citigroup Inc., which arranged the loan for the company in May 2008.

Earlier this year it was reported that Ukrainian billionaire Viktor Pinchuk wants to sell shares of Interpipe Ltd. in an IPO by the end of 2011.