Ukraine’s private creditors voted positively to enable debt restructuring, approving the deal, Bloomberg reported. The deal allows Ukraine to ease the debt burden and remain a possibility to participate in capital markets as soon as war will pass to a cooler phase.
The voting in favor included outstanding sovereign and guaranteed Ukravtodor Eurobonds, totaling Hr.20.47 billion ($497 million) [Hr. 24.3 billion ($590 million) with the accrued interest].
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97.38 percent of Eurobond holders supported the restructuring agreement, significantly exceeding the two-thirds vote threshold required. The investors were extremely active since their participation levels varied from 95 to 98.87 percent, a press release from London Stock Exchange said.
The positive vote was vital for debt restructuring deal to be completed. Which happened in the right time – Ukraine is expecting to meet the International Monetary Fund team to come to Ukraine on Sept. 4.
The IMF will assess whether to disburse the next $1.1 billion from a $15.6 billion aid program, according to Bloomberg’s sources. This time the delegation will come to Ukraine’s capital – previously meetings were held in Warsaw, Poland.
New Eurobonds conditions overview
Bondholders agreed to forgo $8.67 billion in claims, accepting nominal losses of 37 percent of their holdings across 13 bonds. Debt payments during the IMF Program period are reduced to 90 percent, saving the country $11.4 billion by 2027 and by 2033 the reduction will be 75 percent – $22.75 billion.
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“This near-unanimous level of support was achieved in less than 5 months, allowing Ukraine to reach a deal before the expiration of the 2-year payment freeze, as agreed in 2022,” Ukraine’s Minister of Finance Serhii Marchenko reported in a press release.
Ukraine also extended the average maturity of Eurobonds by nearly 4 years, on top of the 2022 2-year extension.
Ukraine’s new bonds will begin trading after the deal’s Aug. 30 settlement date, Bloomberg reported.
Background
Russia’s full-scale 2022 invasion forced Ukraine to increase debt to cover war spending. With defense spending increased from 5 percent of GDP to 22 percent, Ukraine and bondholders agreed to pause payments for two years.
Sources in the Ministry of Finance told Kyiv Post that it had meanwhile kept in touch with bondholders over the two-year pause, discussing debt restructuring.
The Ministry of Finance will still negotiate new conditions for GDP-linked warrants where creditors get interest based on the success of the economy. They had been issued during Ukraine’s 2015 debt restructuring.
As a safety measure, Ukraine adopted a law on July 18 that suspends foreign debt payments: payments on international sovereign debt and state-guaranteed obligations.
Ukraine had a deadline to bring negotiations to a result on August 10, but there was no certainty about a success: the first round of negotiations brought no result as Ukraine proposed less favorable conditions to what investors wanted.
The second round of negotiations brought success, but Ukraine still needs to settle the judicial infrastructure to bring the deal to an end.
Meanwhile, Ukraine’s Cabinet of Ministers approved resolution 977 according to the law – Ukraine’s government will suspend payments for $700 million in debt to Cargill Financial Services International and $825 in Ukrenergo Eurobond guarantees.
Cargill’s Eurobonds should have matured during 2024-2026. Payments for Ukrenergo Eurobonds, originally issued in 2021 for $825 million, will mature on November 9, 2028, but will be suspended.
From May 31, 2025, payments for obligations under GDP-warrants will be temporarily suspended until the government agrees on new conditions.
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