* Both sides at loggerheads over need for writedown
* IMF wants deal reached by June
* Ukraine hopes for second $2.5 bln tranche of IMF aid (Adds finance minister quote)
By Natalia Zinets
KIEV, May 15 (Reuters) - Foreign creditors must agree to the “legitimate” deal offered by Ukraine in talks on restructuring some $23 billion worth of its debt, Prime Minister Arseny Yatseniuk said on Friday.
Negotiations turned sour this week after a group of Ukraine’s largest bondholders repeated objections to any writedown of the principal owed, while the Finance Ministry accused creditors of being unwilling to negotiate in good faith.
Speaking to parliament on Friday, Yatseniuk said that bondholders should appreciate the parlous state of Ukraine’s finances.
“The country is at war. We have lost 20 percent of our economy. We approached creditors with a clear position on the procedure and terms of restructuring,” he said.
“We ask, appeal and insist that external creditors appreciate the current situation and accept Ukraine’s offer, which is legitimate and a way to help Ukraine.”
The deal put forward by Kiev foresees extending the maturity of the bonds and reducing the principal and the coupon - a “haircut.”
“It requires all three ... it’s important our creditors understand,” Finance Minister Natalia Yaresko told the European Bank for Reconstruction and Development on the sidelines of its annual meeting in Tbilisi on Friday.
The creditor committee said on Tuesday it had submitted new, detailed restructuring proposals, but the plan still rejects any haircut. The committee includes investment firm Franklin Templeton and represents investors holding about $10 billion worth of bonds.
Ukraine is under pressure to reach a deal. The International Monetary Fund says it wants an agreement in place before it concludes its latest review of Ukraine’s $17.5 billion bailout programme, which is slated to go to the IMF board in June.
A second tranche of about $2.5 billion hinges on the outcome of the IMF review. Ukraine sorely needs the cash to shore up its foreign currency reserves.
Concluding restructuring talks by June was always considered optimistic, but the divisions that emerged this week further undermine prospects for a quick deal.
Ukraine has accused bondholders of not being constructive, while the bondholder committee said neither Kiev nor its advisers had shown substantive engagement with its initial plans, delivered four weeks ago.
“I ask them (bondholders) to be constructive, to come to the table in a transparent fashion, to come in a responsive fashion and in good faith. We need to talk, we need to talk face to face and we need to do that in the very near future,” Yaresko said. (Reporting by Natalia Zinets; Additional reporting by Margarita Antidze in Tbilisi; Writing by Alessandra Prentice; Editing by Richard Balmforth, Larry King)