Ukraine's finance minister visits the California grounds of Kiev's biggest creditor Wednesday for "make or break" negotiations aimed at keeping the cash-strapped former Soviet country from hurtling into default.
Natalie Jaresko's talks with the Franklin Templeton investment giant in San Francisco come with Ukraine steadfastly refusing to make a $500 million (450 million euro) bond repayment that comes due on September 23.
Kiev has warned that failure to strike a final restructuring agreement would leave it with insufficient time to coordinate similar deals with its other main lenders.
But sources close to the discussions said the US financial titan was willing to accept a write-down on the face value of its original investment of no more than 10 percent -- well short of the 40 percent figure originally proposed by Jaresko.
"The 5-10% haircut (which also includes conditions) is unacceptable to the Ukrainian side and they are very much hoping for an improved offer closer to the situation Ukraine faces," another person close to the negotiations told AFP.
"But time is running out," the source added. "There is a clause written into the September 23 repayment which states that any changes to the payment must be approved by the bondholders at least 21 days before the payment is due."
Franklin Templeton leads a pack of four major investment houses that hold about $8.9 billion of Ukraine's maturing debt.
A $40 billion IMF-led rescue programme requires Ukraine to find savings on $15.3 billion in its overall foreign commitments over the coming four years.
An agreement with the California group could open the door to similar deals being struck with the other three members of the Ad-hoc Committee of Noteholders to Ukraine.
But Kiev must also find a compromise with other bondholders who are negotiating on their own.
All these arrangements must be signed by September 2 in order to keep Ukraine from entering a so-called "hard default" that may shut off its access to global borrowing markets for years to come.
"Time is of the essence," said the person close to the discussions. "This is the make or break meeting."
- 'Zero-sum game' -
The two sides have rejected a series of duelling counter-proposals and have shown little overt willingness to compromise.
The commercial lenders argue that Kiev is under-reporting the size of its expected 2016 economic bounceback from contraction that should reach about nine percent this year.
They demand higher interest payments in return for any debt write-down or extension. The creditors also expect Kiev -- now mainly making payments on interest -- to resume covering its maturing principal amounts as soon as it returns to growth.
Sources said the talks could stretch out over several days in San Francisco but probably not go into next week.
Some analysts expect Ukraine to seek a temporary debt maturity extensions that could provide all sides more time to talk.
But both the International Monetary Fund and Washington have mounted pressure on lenders to accept sacrifices for the benefit of the war-torn and fervently pro-Western east European state.
US Treasury Under Secretary Nathan Sheets urged bondholders last week "to be part of a solution that will decidedly advance their own interests as well as Ukraine's economic and geopolitical fortunes."
"Creditors involved in the ongoing debt restructuring negotiations should heed the long view, and not treat this as a zero-sum game," Sheets added.
The IMF has vowed to keep its $17.5 billion credit line to Ukraine open even if Kiev fails to strike a deal with creditors in time to restructure the September Eurobond.