* JPMorgan: Ukraine will likely be able to avoid hard default

* Two-year payment pause on international bond expires end-Aug

* Government, bondholder proposals were far apart

LONDON, June 20 (Reuters) - Ukraine's international bondholders could suffer a writedown of between 30% and 42% in a debt restructuring deal, but Kyiv is likely to avoid a hard default, JPMorgan said in a note published on Thursday.

War-torn Ukraine is racing against the clock to restructure some $20 billion of international bonds before a payment suspension expires at the end of August.

A first round of formal talks with bondholders did not yield a deal, the government announced on Monday, raising the spectre of Ukraine slipping into default if it cannot agree on a restructuring deal or an extension of its payment moratorium.

"The first round of discussions provides a floor and ceiling to the eventual bond recovery levels," JPMorgan strategist Nishant M Poojary said in a note to clients, acknowledging both sides had been quite far apart in their proposals.

"Going forward, the authorities and the committee will need to iron out some of the key differences around the relief assumptions and instrument structure and meet in the middle."

Ukraine has been engulfed in an economic crisis since Russia's invasion in February 2022.

JPMorgan simulated in its calculations a ‘meeting in the middle’ package which incorporates elements proposed by both the government and the bondholder group.

That hypothetical compromise would include three different instruments - standard bonds, bonds with step-up coupons, and a third instrument where both the principal and the coupons adjust on the basis of average tax revenue, JPMorgan said.

"The eventual haircut could be in the range of 30% to 42% in this package," said Poojary, referring to the write down investors would face.

JPMorgan highlighted as a positive that both sides' proposals addressed a potential downside scenario for the country and included coupon payments from the outset, though at varying levels, with the government offering a symbolic 1% to start off compared to bondholders suggesting more that 7%.

While the path ahead for Ukraine's debt restructuring looks bumpy, the overall trajectory is positive, said Poojary, adding the bank saw a "low probability of a hard default".

"Notwithstanding the higher expected recovery levels than current prices, we think there are lot of sticking points and subjective issues that need to be cleared before the eventual deal takes place," he added.

Ukraine's dollar-denominated bonds trade at deeply distressed levels of between 27-31 cents in the dollar, according to Tradeweb data. (Reporting by Karin Strohecker Editing by Christina Fincher)