What's the State of Ukrainian Debt?

It looks like time for Ukraine to crack on with restructuring its $20 billion debt pile.

A ceasefire (albeit not necessarily a perfect one) has been agreed in Minsk and the cash-strapped country agreed a new bailout package with the International Monetary Fund.

With those deals in place, investment bank Lazard is now expected to press ahead with restructuring talks as Ukraine seeks to ease its debt burden. Lazard, which Ukraine Wednesday confirmed will be leading the negotiations, declined to comment on the timetable for the talks.

So, how tough will the terms be for investors?

"I've heard people expecting a $10 billion contribution from private-sector involvement, and given the size of Ukraine's outstanding debt that would infer a relatively significant haircut, which may make this more difficult to sell [to investors]," said Angus Halkett, a fund manager at Stone Harbor Investment Partners, which owned Ukrainian bonds at the end of last year, according to regulatory filings. Mr. Halkett declined to comment on current holdings.

Investors are already bracing for a sizeable hit. Ukraine’s bonds have been trading well below face value for the last few months and currently range in price from around 63 cents on the dollar for debt maturing this year to as low as 54 cents on the dollar for bonds maturing in 2023, according to Tradeweb.

U.S. fund manager Franklin Templeton, which owns a hefty chunk of Ukrainian debt, is likely to be heavily involved in the talks. Franklin Templeton declined to comment.

Talks will also likely involve Russia, which owns a $3 billion bond it bought from Ukraine in December 2013. That could add an extra layer of complexity to any restructuring proposals, of course.

"Negotiations are expected to be tough, given likely Russian holdouts," said Tim Ash, an emerging-market analyst at Standard Bank.