Klitschko Announces Kiev to Default on Eurobond Debt

Kiev city council announced that from November 6 it will no longer make payments on Eurobonds it issued in 2005 and 2011.

The Ukrainian capital Kiev will no longer make payments on its foreign debts from November 6, Kiev City Council announced on Thursday, claiming it is unable to pay the debt due to the declining value of the Ukrainian hryvnia.

"An important question has just been resolved during the session of the Kiev Rada – to stop payments on the capital's foreign debts," announced Vitaliy Klitschko, the Mayor of Kiev.

According to the statement from the city council on October 8, in 2005 Kiev issued Eurobonds worth $250 million at an annual interest rate of 8 percent to finance the construction of Podolsky Bridge, which mature on November 6 2015. 

In 2011 Kiev issued an additional $300 million of Eurobonds at an annual interest rate of 9.375 percent, which mature on July 11 2016.

"The budget committee passed a unanimous decision to recommend the suspension of servicing and repayments on the bonds," announced Andrey Strannikov, representative of the Udar-Solidarnost political bloc.

"That $550 million was issued when the exchange rate was 5.05 hryvnia to the dollar. Our foreign debt has risen several times in relation to the hryvnia. Today, Kiev's debt obligations are 18 billion hryvnia [$846 million], including foreign debt obligations."

"We are spending two billion hryvnia [$94 million] every year on servicing these debts."

"We took this decision in view of the difficult economic situation, and the interests of Kiev and its residents," said Mayor Klitschko, explaining that the city council was focused on preparing for the cold winter ahead rather than servicing its debt, and wanted to agree with creditors on ways of restructuring the debt and deferring payments.

"We will announce the result of our negotiations in due course," said Klitschko.