This Is Outrageous-----Washington To Guarantee More Ukrainian Debt So Kiev Can Fund Its Bloody Civil War

By Michael Turner at Reuters

The Republic of Ukraine has sent out a request for proposals (RFP) to banks for a new US government-guaranteed bond, according to three sources.

This is the second time the US government has thrown its financial backing behind a Ukrainian international bond issue.

In May 2014, the US guaranteed a US$1bn Ukrainian bond maturing in 2019 through the US Agency for International Development.

That bond was given a credit rating in line with the US sovereign at Aaa by Moody's, AA+ by Standard & Poor's and AAA by Fitch.

This is a far cry from Ukraine's credit rating, which stands at Caa3, CCC and CC with the same three agencies.

The RFP comes just over a week after Ukraine agreed a new four-year US$17.5bn bailout facility with the International Monetary Fund.

As part of the IMF agreement several institutions - including the European Union, World Bank and US - have agreed to provide around US$7.5bn between them, according to analyst estimates, to the war torn country.

It is not clear whether the US-backed bond forms part of the US contribution.

Meanwhile, Ukraine is obligated under the IMF agreement to restructure at least US$15.3bn of outstanding debt.

Ukraine's finance minister Natalia Yaresko confirmed during an investor call last week that bondholders will see haircuts to principal, as well as maturity extensions and changes to interest payment.

Russia, which holds US$3bn of Ukrainian debt that comes due in December this year, will not be exempt from the cuts, Yaresko said.

A clause in the debt owed to Russia allows it to accelerate bond payments if Ukraine's debt-to-GDP ratio breaches 60% - a number that has been passed largely because Ukraine's industrial power centre Donbass has ground to a halt under sustained conflict. Russia has repeatedly said that it would not accelerate the debt.

UPDATE 1-Ukraine sends request for proposals for US-guaranteed bond | Reuters.

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