Ukraine aims to restructure debt timely and avoid default
Ukraine has informed investors that it still hopes to restructure its debt amid wartime conditions before the moratorium on payments ends on 1 August.
Source: Reuters
Ukraine also intends to include GDP warrants as part of its efforts to restructure international sovereign bonds amounting to around US$20 billion.
This announcement is reportedly part of Ukraine's new efforts to attract investors after official negotiations for restructuring last month concluded without an agreement.
Statements released last week indicated a significant gap between the 20% trim that bondholders are willing to accept and Ukraine's proposal, which would involve a reduction of up to 60%.
Ukraine has US$19.7 billion in outstanding international bonds and owes US$2.6 billion in GDP warrants – a fixed-income instrument whose payouts are linked to the growth rates of economic production.
The warrants were created as a sweetener for creditors during Ukraine's debt restructuring in 2015 following Russia's annexation of Crimea.
Payments on the warrants are included in the critical Debt Sustainability Analysis (DSA) by the IMF and may divert funds from largely symbolic coupon payments that the government proposed to bondholders as part of the restructuring.
Ukraine also intends to add a most favoured creditor clause to the restructured bond instruments to make sure that holders of debt from state-owned enterprises do not receive better terms when this debt is restructured at a later stage.
Background:
- Ukraine has a month to reach an agreement with creditors on debt restructuring and avoid default.
- Prices of Ukrainian Eurobonds traded on Western markets have shown little reaction to the historic decision to allocate US$50 billion from frozen Russian assets in Ukraine's favour.
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