Ukraine and GDP warrant holders exchange restructuring proposals to no avail

MOSCOW. April 24 (Interfax) - The Ukrainian government held a meeting with certain members of an ad hoc committee of GDP-linked warrant holders from April 15-23 and exchanged proposals for restructuring the related obligations, but each party rejected the other's proposal.

"Ukraine intends to continue engagement with the warrant holders and would consider all available options to restructure the warrants," Ukrainian media quotes a stock exchange filing by Ukraine as saying on Thursday.

It said these options must be consistent with: the objective of restoring debt sustainability in line with Ukraine's IMF Extended Fund Facility Program: Ukraine's commitment made in connection with the Eurobond restructuring in August 2024 to ensure appropriate burden sharing across all commercial claims within the restructuring perimeter: and the government's moratorium approved on August 27, 2024 on payments under the warrants from and after May 31, 2025 until the completion of the restructuring of the warrants.

Representing Ukraine on the ad hoc committee are its legal and financial advisers, White & Case LLP and Rothschild & Co, respectively, and representing the holders are legal adviser Cleary Gottlieb Steen & Hamilton LLP and financial adviser PJT Partners (UK) Ltd.

Ahead of the meeting, Ukraine presented its proposals to the holders, who rejected them and sent Ukraine a counter-proposal. Ukraine said it could not accept this proposal and declined to make any further proposals during the aforementioned period.

Ukraine's proposal contained two options. The first provided for the exchange of GDP warrants for Eurobonds issued in the framework of their restructuring in 2024, with an exchange ratio of 1.35x (GDP warrants issued for a notional amount of $3.239 billion).

The second option was to waive payments on GDP warrants in 2025-2028 if economic growth exceeds 3% in 2023-2026, and an amendment to the call option. The latter provided for deferring it until May 31, 2029 and modifying the redemption price with a gradual increment to 85% of the notional amount until May 31, 2027, 90% until May 31, 2028, and 100% until May 31, 2029. Also, the warrant holder would receive Ukrainian Eurobonds issued under their 2024 restructuring at an exchange ratio of 0.366x.

The holders of GDP warrants were allowed to choose between these options.

In their counter-offer, the holders proposed that Ukraine cover 75% of the payment for 2023 GDP growth this year, or $406 million of $542 million, and issue bonds for the remaining amount maturing in February 2029 and a coupon of 7.75%. These calculations reflect the fact that GDP warrants for a notional amount of $2.635 billion are not in circulation in Ukraine, while the Ukrainian Finance Ministry had bought back the remainder.