Ukrainian govt approves terms of Eurobond restructuring, imposes moratorium on payments
MOSCOW. Aug 2 (Interfax) - The Ukrainian government has approved fundamental agreements with a special committee of holders of its Eurobonds totaling about $23 billion that call for writing off 37% of the debt with the possibility of restoring 12% if the country reaches a certain GDP level in 2028, Ukrainian media reported, citing a July 31 cabinet resolution with the terms of a new bond issue posted on the government website.
Under the resolution, Ukraine will issue new Eurobonds maturing in 2029-2036 with a yield that will gradually grow from 1.75% in the next few years to 7.75% at the end of the term. Ukravtodor Eurobonds totaling $700 million that were issued under government guarantees will be exchanged on the same terms.
The resolution also imposes a temporary moratorium as of August 1 on Eurobond payments to carry out the restructuring.
The Finance Ministry will pay a total of up to $246 million in compensation to bondholders for the exchange. Under previously published agreements, payment for consent amounted to 1.25% of the amount of bonds being exchanged.
In exchange for existing bonds, Ukraine will issue new dollar-denominated bonds in two parts: Part A consisting of four series maturing February 1, 2029, 2034, 2035 and 2036 and Part B, also consisting of four series maturing February 1, 2030, 2034, 2035 and 2036.
The published resolution does not have a breakdown of these bond issues, while previously announced agreements specified that the Part A Eurobonds would break down into 12.5% maturing in 2029, 32.5% maturing in 2034, 30% in 2035 and 25% in 2036, while the Part B bonds would break down into 9.5% maturing in 2030, 35.5% in 2034, 30% in 2035 and 25% in 2036.
The last two series of the Part B bonds, maturing in 2035 and 2036, may be issued additionally on November 15, 2029 if Ukraine's nominal GDP in 2028 exceeds 103% of the nominal GDP forecast by the International Monetary Fund in the baseline scenario of the fourth review of the EFF program (UAH11.678 trillion compared to UAH6.538 trillion in 2023), and real GDP is at least equal to the figure in the IMF's baseline scenario, which projects economic growth of 2.5-3.5% this year, 5.5% in 2025, 5.3% in 2026, 4.5% in 2027 and 4.3% in 2028.
However, the issue of these additional bonds is limited to 12% of the existing debt with interest. This is the maximum amount of debt creditors can restore after the write-off if nominal GDP exceeds forecast GDP in the IMF program by 7.5% taking into account the forecast exchange rate of the hryvnia.
Coupon payments on all the bonds will be made every six months, on August 1 and February 1. The coupon rate on the A bonds will be 1.75% in 2024-2025, 4.5% in 2026 and the first half of 2027, 6% in the second half of 2027 through 2033, and 7.75% starting in 2034. For the B bonds, there will be no coupon payments until the second half of 2027, and subsequently they will be made at a rate of 3% from the second half of 2027 through 2033 and 7.75% starting in 2034.
The Finance Ministry said earlier that, thanks to the restructuring, the maturity of the Eurobonds will be extended, with the redemption of the first $1.172 billion scheduled for 2029, while before the restructuring $9.381 billion of principal debt (not including capitalized interest) was due to be paid in 2024-2029.
"The agreement will save $11.4 billion on debt servicing over the next three years. By 2033, the savings will total $22.75 billion. This will free up vital financial resources that can be used for defense and social spending," Finance Minister Sergei Marchenko said earlier.
Ukraine's total debt on Eurobonds with interest amounts to $23.4 billion, with the principal debt (not including Ukravtodor bonds) totalling $17.267 billion and 2.25 billion euros. Two Eurobond issues in euros will be exchanged for dollar-denominated bonds at the average exchange rate in July.