Ukraine, creditors committee agree to write off 37% of Eurobond debt, replace another 23% with special bonds

MOSCOW. July 22 (Interfax) - The Ukrainian government and a special committee of owners of its Eurobond debt totaling around $20 billion have agreed in principle to restructure the securities, including writing off 37% of the debt, Ukrainian media reported, citing the government.

The government said that four new issues of Eurobonds ("A" bonds) maturing in 2029-2036 will replace another 40% of the overall Eurobonds plus accrued interest on the Irish Stock Exchange, and that four issues of special bonds ("B" bonds) maturing in 2030-2036 will replace 23% of the overall amount. Part of the special bonds will be issued only once the country has attained a specific GDP level in 2028.

The holders of securities will be remunerated 1.25% of the amount of the exchanged Eurobonds as a reward for participating in the securities exchange.

The statement specifies that the committee of creditors jointly with a limited number of investors, who have also supported the terms and conditions, represent the holders of around 25% of the Eurobonds.

The securities exchange also notably plans to include Ukravtodor Eurobonds totaling $700 million.

Ukraine's Finance Ministry said that maturity of the Eurobonds would be extended upon completing the restructuring. Specifically, the first repayment totaling $1.172 billion will be in 2029 rather than totaling $9.381 billion in principal, excluding capitalized interest, subject to repayment from 2024 to 2029 without restructuring.

"The restructuring agreement envisages the existing Eurobonds being exchanged for a package of new Eurobonds, with a nominal reduction of 37% in the debt at the initial stage and a reduction of approximately 60% in the net present value of the debt," the Finance Ministry said.

The agreements reached indicate that "A" bonds are issued in four series at 12.5% of the total amount of all "A" bonds maturing on February 1, 2029; at 32.5% maturing on February 1, 2034; at 30% maturing on February 1, 2035; and at 25% of the total amount of all "A" bonds maturing on February 1, 2036.

The "B" bonds are scheduled for issuance at 9.5% of the total amount of "B" bonds maturing on February 1, 2030; at 35.5% maturing on February 1, 2034; at 30% maturing on February 1, 2035; and at 25% of the total amount of "B" bonds maturing on February 1, 2036.

The Finance Ministry said that the two "longest" series of "B" bonds will be issued on the condition that Ukraine's nominal GDP in 2028 exceeds the nominal GDP projected by the International Monetary Fund (IMF) by at least 3% [UAH 11.678 trillion versus UAH 6.538 trillion in 2023] in line with the baseline scenario after the fourth review of the Extended Fund Facility (EFF) Arrangement; and that Ukraine's real GDP in 2028 is at least equal to the real GDP in the IMF's baseline scenario [which envisages economic growth of 4.3% in 2028].

Coupon payments on "A" bonds will be 1.75% in 2024-2025, 4.5% in 2026-first half of 2027, 6% in the second half of 2027-2033, and 7.75% starting in 2034.

There are no coupon payments on "B" bonds until the second half of 2027, and then there are payments of 3% from the second half of 2027 to 2033, inclusive, and 7.75% from 2034 onwards.

The Finance Ministry said that closed-door meetings were held with the committee of creditors from July 12 to 19. The overall debt on Eurobonds, including interest, totals $23.4 billion, and the principal debt alone, excluding the Ukravtodor bonds, totals $17.267 billion and 2.25 billion euros, respectively.

The Finance Ministry also said that agreements reached are in line with the targets of the IMF's EFF Arrangement, namely a debt/GDP ratio of 82% by the end of 2028 and 65% by the end of 2033, and the average financing requirement at 8% of GDP in 2028-2033.

"The agreement should provide savings of $11.4 billion on debt servicing over the next three years. The savings should total $22.75 billion by 2033," Ukraine's Finance Minister Sergei Marchenko said.

The official exchange rate as on July 22, 2024, is UAH 41.4912/$1.