By Natalia Zinets
KIEV (Reuters) - Ukraine said on Thursday it was prepared to battle Russia in court after the Kremlin refused to join a critical debt swap deal for the beleaguered country that has been accepted by the majority of its other creditors.
The debt relief deal plays a key part in Ukraine's plans to shore up its war-torn economy, which has been brought close to bankruptcy by years of corruption and economic mismanagement.
Ukraine agreed the debt exchange with a group of its largest creditors in order to plug a $15 billion funding gap under an International Monetary Fund-led $40 billion bailout programme, but remaining creditors still needed to approve the plan by vote on Wednesday.
"More than 75 percent of creditors on each bond voted for the restructuring," Prime Minister Arseny Yatseniuk said. "As expected the only country that didn't take part in the voting was the Russian Federation."
A $3 billion Eurobond held entirely by Russia is included in the sovereign and sovereign-guaranteed bonds to be restructured, but the Kremlin has repeatedly said it will not participate in the process, arguing the debt has the status of an official loan as opposed to a commercial one.
"If they think they're unique, we're prepared to go to court ... If they're normal, then we propose on Oct. 29 they accept the same conditions that the other creditors accepted," Yatseniuk said in a briefing.
"We are willing to go to legal war with Russia," he said.
Moscow bought the bond from Kiev in December 2013 as part of its attempts to rescue the pro-Russian president Viktor Yanukovich in the face of street opposition to his rule. He fled two months later as protests widened, opening a rift between Moscow and the new pro-European leaders who followed him.
Negotiations over repayment of the bond, which Moscow wants settled in full and on time in December this year, are complicated by Russia's subsequent annexation of Crimea and its backing for separatists in eastern Ukraine.
The IMF has not yet decided whether it views Russia's bond, which matures on Dec. 20, as official sector debt. Ukraine insists it will not pay the debt in full or offer better repayment terms than those offered to other creditors.
Kremlin spokesman Dmitry Peskov said on Thursday Moscow's stance on restructuring Ukraine's debt had not changed. Earlier this week Vladimir Putin said the IMF should lend Ukraine the $3 billion to pay off Russia.
Ukraine's bonds do not have cross-default clauses, meaning holders of one bond cannot sink the entire restructuring deal if those holding other issues vote in favour of the swap.
Finance Minister Natalia Yaresko, who spearheaded Ukraine's months-long negotiations with bondholders, said new bonds will be issued in the middle of November to creditors participating in the swap.
(Additional reporting by Vladimir Soldatkin in Moscow; Writing by Alessandra Prentice; Editing by Richard Balmforth)
