Goldman Sachs Predicts Solvency Crisis, Default in Ukraine as Soon as July

Goldman Sachs Group has warned that Ukraine is facing a solvency and liquidity crisis, will likely miss its bond coupon payment next month and will enter into default.

“Ukraine will not make the July 24 coupon payment and, as a result, will enter into default at that point,” Bloomberg quotes Goldman Sachs analyst Andrew Matheny as writing in his research note on Ukraine.

The analyst also warned that Kiev will likely issue a moratorium on its foreign debt repayment plan, as it will fail to settle the disagreement with its creditors.

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

Ukraine has asked creditors to take a 40 percent write-down in principal and accept new bonds tied to its future economic performance under its repayment plan.

Finance Minister Natalie Jaresko is set to meet investors in Washington next week as she assesses the potential damage from a default, which would limit future access to global capital markets.

The creditors, who own some $9 billion of Ukraine’s foreign-currency debt, have so far opposed the state’s terms after three months of negotiations.

The creditors’ committee that is engaged in talks with Ukraine includes T. Rowe Price, TCW Group, BTG Pactual and Franklin Templeton investment funds.

The creditors offer “not to pay the principal sum until 2019,” instead of writing off the debts. At the same time, they showed readiness to participate in trilateral talks in Washington with the participation of the Ukrainian Ministry of Finance and the IMF.