Kiev: Ukraine’s finance minister said a “win-win” deal for restructuring $18 billion of debt had been agreed with a group of its largest creditors, involving a 20 per cent reduction in total principal owed.

The agreement ends more than five months of sometimes bitter negotiations aimed at plugging a $15 billion funding gap in Ukraine’s finances which are suffering from the economic damage of the fighting in the east with pro-Russian separatists.

The deal meets all targets set by an International Monetary Fund bailout programme, Ukraine’s Finance Minister Natalia Yaresko said late on Wednesday in comments embargoed until Thursday.

“Everyone’s done well out of this deal. That’s why it’s collaborative. It’s not one side winning, it’s a win-win situation. We’re all now moving forward without putting the value of the bonds at any further risk, she said.

Ukraine’s sovereign dollar bond prices surged after news of the deal.

Its 2017 issue firmed 8.7 cents to trade at 64.5 cents in the dollar according to Tradeweb data, while the 2022 bond rose 10 cents.

An issue maturing at the end of September, which is also subject to restructuring, rose 4.3 cents to also trade at 64 cents.

In Moscow, Russian Finance Minister Anton Siluanov said Russia would not participate in the agreement. Ukraine owes Russia a $3 billion Eurobond due for full repayment in December.

The deal, which still needs to be approved by creditors outside the group, includes coupon levels of 7.75 per cent and extensions of four years for each bond’s repayment to give Ukraine a breathing space.

The deal should help keep Ukraine’s national currency, the hryvnia, stable and allow increased spending on defence in the east where Ukraine faces a rebellion from the pro-Russian separatists as well as greater financial support for the poor.

Talks had been held up by disagreement with creditors on whether to provide Kiev with a write-down on the face value of the bonds. Kiev had initially sought a 40 per cent ‘haircut.’ “We started in different places, because the creditor committee didn’t believe we had a solvency problem ... but my goal was not a particular number, it was meeting those IMF targets,” Yaresko said.

She said she hoped it was “highly unlikely” remaining creditors would reject the agreement and forecast that the process would be wrapped up by the end of October.