LONDON: Ukraine has started a process to exchange securities linked to economic growth into bonds as it seeks to restructure the terms of US$3.2bil in debt after another round of talks with a group of private creditors.
The government in Kyiv offered to replace the so-called gross domestic product (GDP) warrants with bonds and cash and expects to close the deal by the end of the year, according to a statement on Monday.
The east European nation is looking for ways to preserve financial resources for defending itself against Russia’s full-scale invasion and potential post-war reconstruction.
The offer follows Ukraine’s skipped a payment of US$665mil on the warrants in June and several attempts to restructure the securities with a group of holders, which include hedge funds Aurelius Capital Management LP and VR Capital Group.
The move also comes as the United States, Ukraine and its European allies engage in new efforts to prepare a plan for talks with Moscow to end the fighting.
“The GDP-linked warrants have become a source of substantial fiscal risk due to extreme volatility of the war time,” finance minister Serhiy Marchenko said.
“Without a restructuring, Ukraine would risk paying billions of dollars resulting from a post-war economic rebound, diverting vital funds away from defence, reconstruction and essential public services.”
The warrants, which mature in 2041, weren’t included in last year’s US$20bil debt restructuring deal due to their complex structure and the potentially large payout from a post-war economic recovery.
The securities traded above 93 US cents on the dollar on Monday, the highest since December 2021.
In the latest round of talks last week, the two sides made “meaningful progress on a number of the principal commercial and structural elements,” the finance ministry said in the statement.
“At the same time, a number of additional points remain under active negotiation between the parties and the ad hoc group and its advisers have not yet reached full agreement on the invitation or the terms of the new securities,” it added.
While the creditors’ committee said it continued “to engage constructively and conscientiously with Ukraine,” it called other debt holders to refrain from voting on the proposal until its further announcement is published on Dec 4, according to an emailed statement.
“The advisers to the ad hoc group intend to host a webinar for all warrant-holders to explain further the implications of the proposed transaction and the important changes that are required to properly protect warrant-holders’ interests,” the committee said. — Bloomberg
