9 Aug 2022 20:01

Holders of Ukraine's GDP-linked warrants endorse proposal on postponing payments

MOSCOW. Aug 9 (Interfax) - Holders of 93% of the volume (in value terms) of Ukraine's GDP-linked warrants outstanding were represented at the meeting to approve the country's deferral and renegotiation proposals, and approximately 91% of these holders agreed with the proposals.

"Accordingly, the necessary quorum was reached and Ukraine received the required consents in favor of the emergency solution," the Ukrainian Finance Ministry said in a statement on the Irish Stock Exchange website.

These results are preliminary, with final results to be announced by Ukraine after the August 10 meeting, which will also consider a proposal to postpone payments on sovereign Eurobonds and state-guaranteed bonds issued by state companies.

The Finance Ministry recalled that the deadline to vote on them is 5 p.m. New York time on Tuesday, August 9. More than 2/3 of holders of Eurobonds of all issues and more than 50% of holders of each issue must support the proposals.

As reported earlier, on July 20, Ukraine proposed that holders of Eurobonds, starting from August 1, should defer all payments and maturities for two years, preserving the current yields. At the end of this period, interest can be paid immediately or capitalized.

With regard to the GDP-linked warrants, a proposal was put forward to voluntarily defer payments coming due in 2023 for 14 months, limit the possible amount of payments in 2025 to 0.5% of GDP for 2023, extend the circulation period of these instruments for a year, while allowing Ukraine to redeem them fully or partially in 2024-2027. Taking into account the one-year extension of the circulation term of the GDP-linked warrants, the last reporting year becomes 2039, and the final date is the repayment date falling on 2041.

The Ukrainian government is proposing that payments on GDP-linked warrants, which come due on May 31, 2023 and are estimated at approximately $100 million, be deferred until August 1, 2024, and that interest at 7.75% per annum be accrued on the amount.

In addition, Ukraine's international partners within the G7 and the Paris Club of creditors declared their willingness to suspend Ukraine's debt payments until the end of 2023, with the possibility of extending the postponement for another year. They also urged private creditors to accept Ukraine's offer to put off payments on its Eurobonds and change the terms of the GDP-linked warrants.

According to the initial terms of the GDP-linked warrants, which were issued as part of the restructuring of Ukraine's state debt in 2015 to replace Eurobonds worth about $3.239 billion, if GDP growth for the year is below 3% or real GDP is less than $125.4 billlion, there will be no payments on the bonds. If real GDP growth is 3% to 4%, payments on the securities will total 15% of the excess of GDP over 3%, and if it is higher than 4%, then another 40% of the excess of GDP over 4%.

Thus, Ukraine in 2023 (under the current conditions) will have to pay 0.06% of GDP, or about $120 million, and taking into account the redemption of GDP-linked warrants by the Finance Ministry on the market for $604.262 million - about $97.6 million.

Furthermore, from 2021 to 2025, payments are capped at 1% of GDP.