JPMorgan Chase & Co. (JPM) Questions Need For Write-Down in Ukraine?

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JPMorgan Chase & Co. (NYSE:JPM) has questioned Ukrainian authorities about the need for writing down the principal of the bonds issued by it. The authorities from the nation are said to be talking to the creditors to find a solution. As the talks were going on, the bonds issued by the Ukraine witnessed the highest levels of trading since Mid-February.

Weakening

JPMorgan Chase & Co. (NYSE:JPM) told Bloomberg that the case for the reduction of principal is getting weakened. The country has issued bonds worth $2.6 billion that would mature in July. It was trading around 49.10 cents. Another note issued by it would mature in 2023. The finance ministry of Ukraine said that the negotiations between the advisers in London would reach an accelerated level this week as the progressing call with bondholders is scheduled on June 5. Therefore, the country wanted to wrap up the issue as quickly as possible.

It would not be easy for Ukraine to substantiate its insistence on write down of a principal following a significant budget surplus recorded in the first four months of the current year, according to its analysts from JPMorgan Chase & Co. (NYSE:JPM). Compared to the projections of the International Monetary Fund estimations, the better fiscal situation has enhanced its profile of debt-to-GDP. The London-based advisors said that the current profile is offering savings that Ukraine is looking for.

Favorable Momentum

Promeritum co-founder, Pavel Mamai, viewed that there was some favorable momentum in Ukraine clearly. The co-founder pointed out that there were buyers who are looking for a quick resolution. Promeritum is managing $140 million in developing-market assets from London. The co-founder also said that the American financial institution’s research suggesting fewer need for a haircut might have helped the situation.

The bonds issued by Ukraine have reportedly been in demand following the reports of creditor-group proposal, which met the targets of IMF for liquidity, as well as, debt sustainability. However, it does not include any writedowns.

Program Implementation

On May 29, the IMF finished its first review of the bailout program of the nation. The institution commended the country’s program implementation. However, the IMF has projected a bigger economic contraction in the current year to 9% compared to the earlier estimation of 5% drop. The country has been in a piquant situation and badly needed to illustrate the progress it has made with the bondholders by the middle of this month.

Ukraine needs to qualify for the next round of loan from the IMF that will be around $17.5 billion. The government is also required to stock up foreign currency reserves since it was aiming for a return to the growth path next year following an 18% contraction of output in the first quarter. That was amidst a separatist conflict in the easternmost regions of Ukraine.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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