Ukreximbank fails to reach repayment extension agreement

* Meeting adjourned on three-month extension plea

* No cross default risk on sovereign debt

* "Zero probability" of Ukraine hitting restructuring deadline

By Michael Turner

LONDON, April 14 (IFR) - The State Export-Import Bank of Ukraine has failed to reach a three month maturity extension agreement with noteholders on a bond due later this month, highlighting the difficulties of Ukraine's broader restructuring plans.

The financial institution has a USD750m 8.375% issue due on April 27, the same date it has set as a deadline for a new meeting, when the firm hopes to achieve quorum to extend the repayment date to July 27.

On Monday, a meeting was adjourned after Ukrexim failed to get sufficient support, which required two-thirds of holders of principal to attend and then three-quarters of those had to vote in favour.

Ukrexim's maturity extension proposal is part of a wider renegotiation of Ukrainian state-linked debt. The government is seeking to make US$15.3bn of savings by restructuring publicly held foreign debt, according to the terms of the International Monetary Fund's bailout programme.

However, Ukraine's ministry of finance has said that given the importance of Ukreximbank and another state-owned lender involved in the process, Oschadbank, to the country's economic recovery, their debt will only be subject to the IMF's programme target of easing liquidity strains, implying that neither banks' debt will be haircut.

Market observers are not surprised that bondholders have pushed discussions with Ukrexim to the brink, especially given the lack of any incentive fee.

"I can only assume that were hoping for some amazing outpouring of goodwill towards them in their time of strife. But unfortunately in the harsh world of financial markets they have discovered that when offered no cash incentive, people usually don't do very much," said a trader.

The bond was trading at a cash price of 62.55 on late Tuesday morning, according to Thomson Reuters, up about one point in the trading session.

NO CROSS-DEFAULT

If Ukrexim fails to meet its obligations, it will not cause a cross-default on the sovereign's debt as the note is not state-guaranteed, according to David Spegel, global head of emerging markets sovereign and credit strategy research at BNP (Paris: FR0000131104 - news) Paribas.

"The next principal payment Ukraine must make is on a republic bond... I'm not including this month's Ukrexim maturity as it is not federally guaranteed and so no cross-default," he said. The sovereign bond payment comes due on September 23, Spegel added.

Some analysts have suggested that the US$15.3bn figure put forward by the IMF might not be enough to have any lasting impact on the country's debt burden. However, this view is not held by all.

"We completed our analysis of the situation earlier in the year and the figure the Fund has estimated is plausible," said Robert Burgess, Emerging Europe, Middle East and Africa chief economist at Deutsche Bank (Xetra: 514000 - news) . "It's hard to be very definitive, especially in a situation as complex as this one."

Ukraine has an end-of-May deadline to finalize negotiations with creditors to restructure its publicly held debt, the country's ministry of finance said in a statement on April 4.

This process appears to be moving forwards, with Reuters reporting last week that five leading holders of Ukrainian sovereign and quasi-sovereign bonds have formed a creditors' committee to discuss the country's debt.

However, there are large doubts that the May deadline will be met.

"I give the chance of Jaresko's [Ukraine's minister of finance] end of May deadline a zero probability of success," Spegel at BNP Paribas (Xetra: 887771 - news) told IFR. "A restructuring in less than three months is unheard of." (Reporting By Michael Turner; editing by Sudip Roy and Helene Durand)