LONDON (Reuters) – Ukraine announced on Monday a preliminary deal with a bondholder group to restructure $19.7 billion in debt. The ad hoc group controls 22% of the bonds, and the government said investors holding an additional 3% of bonds, also indicated their support for the deal.
Key aspects of the agreement, which bondholders must now vote to approve, include the following points.
HAIRCUT
– A 37% nominal haircut on Ukraine’s outstanding international bonds which would save the country $11.4 billion in payments over the next three years.
NEW BONDS
– Two series of bonds issued to replace the existing claims.
– The first, a standard bond series, would make up 40% of outstanding claims. It would start paying interest from next year, with maturities ranging from 2029-2036. It would amortise from 2029.
– A second series making up 23% of the outstanding claim is designed to mature between 2030-2036.
– The second series would not pay interest until 2027, but would include a contingent component, meaning that if the economy outperformed IMF expectations in 2028, payments could ramp up and the overall haircut could be reduced to 25%.
– Both sets of bonds are expected to be index-eligible by leading providers – a key factor for investors.
BONDS ISSUED BY STATE-OWNED FIRMS
– Bonds issued by state agency Ukravtodor – which is in charge of building and maintaining roads – would receive the same treatment as sovereign bonds. The government statement did not mention power grid operator Ukrenergo’s bonds.
BONDS AND WARRANTS
– The deal would remove cross default clauses between the bonds and Ukraine’s $2.6 billion GDP warrants.
– While the warrants were not restructured, the government said it would “ensure the fair and equitable treatment of holders of the warrants in any prospective future liability management.”
(Reporting By Libby George and Karin Strohecker; Editing by Emelia Sithole-Matarise)
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