By Christopher Whittall
An executive at BlackRock Inc., one of the largest holders of
Ukrainian government debt, said bondholders negotiating the
country's debt restructuring should consider taking losses on their
investments.
His comments contrast with the approach of a group of creditors
who formed a committee in March to negotiate a deal with the
conflict-torn country that wouldn't involve a reduction in the
value of the bonds they hold.
Sergio Trigo Paz, head of emerging-markets fixed income at
BlackRock, said Thursday that Ukraine's creditors should not rule
out the possibility of cutting the size of the country's debt pile,
which would involve investors sustaining losses on their
bondholdings.
"That's why we prefer to sit on the sidelines" in the
negotiations, said Mr. Trigo Paz, noting that the creditor
committee is taking a "different approach."
"We always want to be constructive with countries in these
situations. Right now, being constructive is staying on the
sidelines," he added.
BlackRock is one of Ukraine's largest creditors, owning billions
of dollars worth of bonds across both actively managed funds and
those that track indexes.
The International Monetary Fund, which agreed in March to a
$17.5 billion bailout package for Ukraine to help keep the
country's economy afloat, said it is vital that a deal between the
government and the creditors is completed by mid-June.
Mr. Trigo Paz described the situation in Ukraine as "very
fragile." He said the country needs to restructure its debt "once
and for all," instead of opting for a so-called soft restructuring
which, he said, could see the country having to return to the
negotiating table as early as next year.
The creditor committee consists of T. Rowe Price, TCW Group, BTG
Pactual Europe and Franklin Templeton Investments, according to a
statement issued by the group Monday. The firms own about $8.9
billion of Ukraine debt among them. The largest chunk of that is
owned by Franklin Templeton Investments, which is taking a lead
role in the committee, according to a person familiar with the
matter.
In a statement Monday, the committee said it had provided
Ukraine's finance ministry with a "detailed proposal that the
committee believes meets the objectives of the ministry without any
principal debt reductions and would provide the country with a
solid foundation for economic recovery."
A spokesperson for the creditor group, which is being advised by
Blackstone Group International Partners LLP and Weil, Gotshal &
Manges LLP, declined to comment Thursday.
Ukraine, advised by Lazard Ltd. and White & Case LLP, last
week voiced concerns "about the approach taken by the creditors'
committee" as well as "their lack of willingness to engage in
negotiations."
On Tuesday, Ukraine's parliament passed a bill allowing the
government to halt payments on some foreign debts.
Chiara Albanese contributed to this article.
Write to Christopher Whittall at
christopher.whittall@wsj.com
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