Response to Ukraine's proposals on Eurobonds, GDP-linked warrants to be announced on Aug 10
MOSCOW. July 21 (Interfax) - A response to Ukraine's proposal for the holders of its Eurobonds to defer all payments on them for two years and for the holders of its GDP-linked warrants to amend their terms is expected to be made public on August 10, the Ukrainian media said, citing stock exchange reports.
The holders of Ukraine's GDP-linked warrants have until the evening of August 5 to decide on their vote, and the holders of Ukraine's Eurobonds until the evening of August 9.
When announcing the results, Ukraine will say which series of Eurobonds and in what amount will be included in the deal (a positive decision requires consent from the holders of at least two-thirds of the bond series participating in the deal and at least half of the bonds from each series included it it), as well as whether the cross-condition for the presence of consent both on Eurobonds and GDP-linked warrants has been fulfilled or cancelled.
According to information about GDP-linked warrants, the participants in the deal will receive a reward of 5% of their face value plus the interest accrued on this sum at 7.75% per annum before the date of its payment on August 1, 2024.
As reported, Ukraine on July 20 offered the holders of its Eurobonds a two-year deferral on all payments from August 1 and to extend their circulation period by two years, keeping the current yield rates. Upon completion of this term, the interest may be paid immediately or may be capitalized.
The Ukrainian government has also unveiled a number of proposals to holders of Ukrainian GDP-linked warrants, which include voluntarily postponing payments on GDP warrants due in 2023 for 14 months, limiting the possible amount of payments in 2025 to 0.5% of 2023 GDP, extending these instruments' circulation period by a year, and simultaneously allowing their full or partial buyback in 2024-2027. Given this one-year extension of the GDP-linked warrants' circulation period, 2039 becomes the final reporting year, and the final payment date becomes a date that falls on 2041.
The government has also suggested that the payment on GDP-linked warrants due on May 31, 2023 and estimated at around $100 million should be postponed until August 1, 2024, and the interest at 7.75% per annum will be accrued on this amount.
Furthermore, Ukraine's international partners in the G7 and the Paris Club of creditors have announced their readiness to suspend Ukraine's debt service obligations until the end of 2023, with the possibility of extending this suspension by another year. They have also urged private creditors to accept Ukraine's proposals on delaying payments on its Eurobonds and amending the terms of GDP-linked warrants.
A total of 13 Ukrainian Eurobond issues with a total nominal value of $17.26 billion and 2.25 billion euros are circulating on the market, the Ukrainian Finance Ministry said on its website.
Three Eurobond issues worth a total of $3,170,590,000 mature before July 2024: Eurobonds for $912.350 million on September 1, 2022, for $1,355,230,000 on September 1, 2023, and for $750 million on February 1, 2024.
According to rough estimates, payments on the remaining ten issues of Eurobonds will stand at approximately $3 billion over the next two years at the current rates.
After the official proposal was announced on July 20, Ukraine's Eurobonds even added slightly, except for the most short-term issues, and currently stand at 18%-19.3% of their nominal value for Eurobonds maturing in 2024-2033, at 22.8% for Eurobonds maturing in 2023, and at 33.4% for Eurobonds maturing in 2024.
Meanwhile, the price of GDP-linked warrants grew by 0.7% on Wednesday, up to 23.7% of their nominal value.
Ukrainian Finance Minister Serhiy Marchenko, in turn, anticipates a positive response from Eurobond holders to Ukraine's proposed two-year deferral on payments given the existing level of mutual understanding and mutual respect with investors.
"This process will continue for three weeks. Hopefully, our preliminary agreements with investors allow us to say that investors will heed our proposals and will agree to them," the Ukrainian media quoted Marchenko as saying during the national telethon on Thursday.
"I think that we will find a necessary compromise and will be able to defer payments on the principal amount of the loan and the interest for the period of time that we envisage," he said.
At the same time, Marchenko said that, generally, he is not a supporter of any changes to the rules of the game and believes that the state must honor its commitments.
"But it [Ukraine's deferral proposal] is advisable and justified. It is not a debt write-off or restructuring. Rather, it is a step toward proactive public debt management" he said.