Dividends and Ukraine faces key test on debt-freeze plan in bid to avoid $20 billion default

Prior to Russia invading Ukraine, the analysts who examine the countries finances likely did not have a hard job, Ukraine is a large producer of grains among other aspects in the economy and the grains had a ready market across Europe and Africa. The the war happened and is still going on, the finances coming into the country’s coffers has gone down drastically and expenses to fight the war have gone up.

In an article by Jorgelina Do Rosario and Karen Stochecker of Reuters, Ukraine’s Finance Minister has asked bondholders to defer payments on the international bonds for 24 months.

The war is costing Ukraine $5 billion a month and on September 1 a US $1 billion bond is due.

Ukraine’s Finance Minister Sergii Marchenko said the country had explicit indications of support from some of the world’s biggest investment funds including BlackRock, Fidelity, Amia Capital and Gemsstock.

Luiz Peixoto, emerging markets economist at BNP Paribas said we do not know what kind of shape the Ukrainian economy will be but investors are preparing for a debt restructuring.

Some of the dollar denominated bonds trade at deeply distressed prices, some as low as 17 cents on the dollar.

Linking to dividend paying stocks, there are many companies where the expectation is they will continue to do well no matter what happens in the economy. The companies tend to have reasonably well diversified products and services which people need and that is what investors expect. Sometimes a curve ball happens, and you need to decide to do nothing or seek alternatives, which is why it is important to do your homework to determine what alternatives are attractive to you.

There are more questions than answers, till the next time – to raising questions.

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