19 Jul 2022 20:34

Ukraine seeking to postpone Eurobond payments by 2 years - media

MOSCOW. July 19 (Interfax) - Ukraine's Cabinet of Ministers has decided to postpone payments on Eurobonds until July 2024, Ukrainian media have reported.

Furthermore, the government decided to postpone payments on GDP-linked warrants for the same period, and also proposed to extend the limitation on maximum payments on them from 2025 to the end of 2027 and to lower the payment ceiling from 1% of GDP to 0.5% of GDP.

According to materials on the Finance Ministry's website, there are currently 13 issues of Ukrainian Eurobonds in circulation, including two in euros, and the rest in dollars.

Three issues of Ukrainian Eurobonds worth a total of $3.17 billion are maturing by July 2024: $912.35 million on September 1, 2022, $1.355 billion on September 1, 2023, and $750 millio on February 1, 2024.

Interest payments on these and another 10 Eurobond issues over two years at current rates are estimated at about $2.9 billion.

According to media reports, the government's decision to defer payments on the Eurobonds is still subject to approval by the Verkhovna Rada budget committee.

As reported, at the beginning of last week, Ukraine's Naftogaz, via the issuer of its Eurobonds Kondor Finance plc, appealed to the holders of these securities worth nearly $ 1.5 billion with a proposal to defer coupon payments on them for two years, including a delay for the same period of repayment of 2022 Eurobonds totaling $335 million. This drove sovereign Eurobond price to a historic low.

Consequently, bonds maturing in 2024-2033 were quoted at 16.5% to 18.2% of par value. The shortest bonds maturing in early September 2022 fell the most, by 10.5 percentage points, to 37.3% of par value, while those maturing in September 2023 fell to 25.1% of par value.

However, Ukraine's Eurobonds rebounded late last week on the IMF's statements about Ukraine's intentions to continue carefully servicing its debt.

In particular, 2022 Eurobonds gained the most, almost completely recouping declines - up to 47% of pat value. At the end of the week, bonds maturing in 2024-2033 were in the range of 19%-20.2% of par value, compared with 20.9%-22.5% a week earlier.

GDP-linked warrants also partially recouped losses on Thursday-Friday, to 23.5% of par from 21.9% on Wednesday, but still below the previous week's 25.6% and well below the 38.8% they stood at in early June.

The GDP-linked warrants were issued as part of the restructuring of Ukraine's public debt in 2015 to replace Eurobonds worth about $3.2bn (20% of the restructuring volume) and formally are not part of the country's public debt. Payments under GDP-linked warrants will be made annually in cash in U.S. dollars, depending on the dynamics of real GDP growth in Ukraine in 2019-2038, but after two calendar years - that is, between 2021 and 2040.

If GDP growth for the year falls below 3% or if real GDP falls below $125.4 billion, no payments on these securities will be made. If real GDP growth is between 3% and 4%, repayment will amount to 15% of GDP exceeding 3%, and if it is above 4%, then another 40% of GDP exceeding 4%. In addition, payments are capped at 1% of GDP in the 2021-2025 period.