Ukraine Break-Up: Economist Spells Out the Risk to Bonds - MoneyBeat - WSJ:
"Ukraine’s bondholders could face losses if the country’s southeastern regions break away from Kiev, according to Bank of America Merrill Lynch.
Separatists in Donetsk and Luhansk held referendums at the weekend, which Ukraine said were illegal, where organizers said roughly 9 out of every 10 voters called for independence from Ukraine amid the ongoing tensions with Russia.
Should those two regions and neighboring Kharkiv succeed in splitting from Ukraine, the International Monetary Fund–which last month approved a $17 billion aid program for the country–could call for some form of debt restructuring, said Vadim Khramov, an economist at Bank of America Merrill Lynch.
In a more extreme scenario where all eight southeastern ‘Novorossiya’ regions were to break away (including Dnipropetrovsk, Zaporizhya, Mykolayiv, Kherson and Odessa,) Ukraine’s debt load would become unsustainable and the IMF, which has said it would need to re-design Ukraine’s aid program if the country loses control over its eastern regions, could demand debt restructuring with bondholders taking a sizeable hit, Mr. Khramov said. The IMF couldn’t immediately be reached for comment.
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