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 The two sides are at odds over the necessity of a writedown in the
face value of the bonds. Talks have been going on for three months
with neither side showing signs of budging from their positions.
Ukraine, which is seeking to plug a $15.3 billion funding gap, is
meeting bondholders and the International Monetary Fund on June 30
in Washington to discuss what it has called its "last chance" offer.
Ukrainian Finance Minister Natalia Yaresko said the creditor group
had "so far refused to contribute to Ukraine's recovery," warning
that Kiev was ready to cut off debt payments if negotiations do not
progress.
"The government recognizes that the creditors may not be prepared to
agree, and may continue to block progress toward a solution,"
Yaresko said in a statement.
"In this case the government is prepared to use its existing legal
power to suspend payments."
Kiev says a writedown is needed to make its debt burden more
acceptable, while creditors say the necessary savings can be
achieved without such a "haircut".
Responding to Yaresko's comments, the creditor group said
accusations that they had refused to help Ukraine were "inaccurate."
The group reiterated that it had made a comprehensive offer to
Ukraine that would save Ukraine almost $16 billion over four years
without requiring a haircut and amounted to "even greater support
than (what) the public sector" had offered.
"The Committee again requests that negotiations start as soon as
possible, without preconditions and with an emphasis on solutions,
and urges Minister Yaresko to join the important Washington meeting
next week," it said in a statement.
On Thursday, Yaresko said Ukraine's debt envoy Vitaly Lisovenko
would be attending the meeting in her stead.
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The meeting in Washington will clarify the technical details of the
two sides positions rather than formally start their debt
restructuring negotiations, Lisovenko said on Friday.
"After this it will be very simple. To meet or not to meet, to pay
or not to pay," he told journalists on the sidelines of a finance
conference in Frankfurt.
Ukraine, backed by the IMF, has said bondholders' offer is
unacceptable because it relies on using central bank reserves to
repay the debt.
Seeking to sweeten the offer to creditors, Ukraine said last week
its updated proposal included an instrument allowing creditors to
recover more value if the economy performs better than currently
projected.
This is in tune with one aspect of the creditors' offer which
proposes that coupons be paid only when the economy recovers to a
certain level.
(Additional reporting by Natalia Zinets; Marc Jones in Frankfurt;
Editing by Toby Chopra)
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