Ukraine pays $200 mln on GDP warrants

MOSCOW. Aug 2 (Interfax) - Ukraine made two payments on GDP warrants on July 31 and August 1 for a total of UAH 8.228 billion or $200.61 million at the current exchange rate, Ukrainian media reported, citing the Ukrainian government expenditure portal.

The Finance Ministry on July 31 made a payment of UAH 2.893 billion or $70.52 million, which corresponds to a deferred payment for high GDP growth rates in 2021 and interest accrued on it.

The next day, the ministry paid UAH 5.334 billion or $130.09 million, which is the consent fee for restructuring in 2022.

Earlier, the ministry said that it had bought back warrants for $604.262 million, or about 18.7% of the total of $3.239 billion in GDP warrants issued. Payments on these derivatives repurchased for high GDP growth rates will be returned to Ukraine.

The Ukrainian government approved the payment on GDP warrants by an order dated July 31 without specifying the total amount.

Ukraine reached an agreement with holders of its GDP warrants in August 2022 to revise the conditions on them, specifically, to defer payments due in 2023 by 14 months, limit the possible amount of payments in 2025 for 2023 at 0.5% of GDP, extend the duration of these instruments by a year, until 2039, and also give Ukraine the right to completely or partially repurchase them in 2024-2027.

It was agreed that the payment due on May 31, 2023 for strong economic growth in 2021, estimated at about $100 million, would be deferred until August 1, 2024, and it would accrue 7.75% interest.

Ukraine has already announced plans for a new restructuring of the GDP warrants. A group of investors with over 25% of these warrants in public circulation has hired the firm Cleary Gottlieb Steen & Hamilton LLP (CGSH) to look for other holders and find out their opinion on Ukraine's announced intent to carry out a new restructuring.

The group said in a press release on July 30 that it was "taking under advisement Ukraine's announcement of plans to start discussions on restructuring the warrants, despite the fact that they were already restructured in 2022."

The Finance Ministry said in its July 22 announcement of an agreement to restructure $23 billion in Eurobonds with a group of investors who hold about 25% of these bonds that the GDP warrants are not included in this deal. The ministry also pledged to ensure "fair and equal treatment of warrant holders in any possible future proposal to manage debt."

Under the initial terms of the GDP warrants, which were issued in a government debt restructuring in 2015 in exchange for Eurobonds for a nominal amount of about $3.239 billion, if GDP growth is lower than 3% for the year or real GDP is less than $125.4 billion, no payments are made on the warrants. If real GDP grows by 3% to 4%, the payment on the warrants is 15% of the amount by which GDP exceeds 3%, and if growth is higher than 4%, another 40% of the amount by which GDP exceeds 4% is paid. However, payments were initially restricted to 1% of GDP from 2021 through 2025. The absence of such restrictions on payments after 2025 in the event of strong GDP growth was criticized by some politicians and experts in the country.

Prices for the GDP warrants since they were issued have gone as high as 110% of the nominal amount and even higher, but they are now quoted at about 58%, their highest since February 2022, since when they have fallen below 20%.

Ukraine's GDP grew by 5.3% in 2023, which means the country needs to make another payment of 0.5% of GDP on the warrants in 2025.