24 August 2024
33rd UKRAINE INDEPENDENCE DAY -- The Day After Avoiding Default to Re-Structure "Carry-Over" External Foreign Debt Restructuring
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Ukraine extends 'early consent' deadline for debt restructuring
By Marc Jones
(Reuters) - Ukraine extended an incentivized "early consent" deadline on Friday for international bondholders to back its plan to restructure more than $20 billion of its debt due to what it described as "technical issues".
The deadline was due to run until Friday, but Ukraine's Finance Ministry said in a statement that it had been pushed back to 5:00 p.m. New York time (2200 GMT) on Tuesday, Aug. 27 after it said some creditors ran into issues.
The deadline was due to run until Friday, but Ukraine's Finance Ministry said in a statement that it had been pushed back to 5:00 p.m. New York time (2200 GMT) on Tuesday, Aug. 27 after it said some creditors ran into issues.
Holders who back the deal by the deadline are eligible to receive a incentive payment known as a "consent fee", although with the final voting deadline having always been Aug. 27 anyway it means everyone who now backs it will get it.
If it does, it will slash the face value of Ukraine's bonded debt by more than a third and help bring its overall debt back to a level deemed sustainable enough by the International Monetary Fund and major Western government donors to continue providing their large-scale support.
The "ad hoc creditor committee" of bondholders, which had negotiated the deal with the government, backed the decision to extend the early consent deadline, saying it would help maximize participation and "increase the likelihood of the Invitation's (restructuring's) success."
The "ad hoc creditor committee" of bondholders, which had negotiated the deal with the government, backed the decision to extend the early consent deadline, saying it would help maximize participation and "increase the likelihood of the Invitation's (restructuring's) success."
Ukraine finance ministry did not disclose the share of bondholders that already signed up to the deal, or whether the approval thresholds had been passed.
Negotiations to get it to this stage moved at a breakneck speed in recent months, partly due to the fact a two-year debt payment moratorium creditors granted Kyiv in 2022 expires at the end of the month.
The proposal requires creditors to accept a 37% write-down, or "haircut", to the face value of their holdings. It will save Kyiv almost $11.5 billion over the next three years - the duration of its current IMF program.
In return, they will get bonds worth 40 cents of their original claim.
These will restore interest payments immediately, starting at a rate of 1.75% before rising to 4.5% from 2026, 6% from 2027 and 7.75% from 2034.
They will also receive a bond worth 23 cents, which will not pay interest until August 2027, but will increase to a value of 35 cents if Ukraine's economy is outperforming IMF targets by at least 3% come 2028.
If not enough bondholders back it though, Kyiv will have to go back and rework the deal or come up with some kind of sticking plaster solution like extending the moratorium.
If not enough bondholders back it though, Kyiv will have to go back and rework the deal or come up with some kind of sticking plaster solution like extending the moratorium.
(Reporting by Marc Jones in London and Disha Mishra in Bengaluru, Editing by Louise Heavens, Alex Richardson and David Evans)
Ukraine launches debt restructuring, avoiding default
Kateryna Hodunova
Fri, Aug 9, 2024
Ukraine's Finance Ministry announced on Aug. 9 the terms of the exchange of old bonds for newly issued securities, launching the process of restructuring Ukraine's external debt on Eurobonds.
Kyiv reached an agreement in principle with some of its creditors in late July to restructure the country's external debt, which amounts to around $23 billion.
- Ukraine struck a deal with creditors at the onset of the Russian full-scale invasion to postpone the payments due to the war's pressure on the country's economy.
- The deal to freeze payments of around $23 billion was set to expire on Aug. 1.
- Holders of Ukraine's sovereign bonds are eligible to participate in the exchange to receive new securities, the statement, listed on the London Stock Exchange, read.
The restructuring should be completed by Aug. 27, according to the statement. Ukraine will pay additional funds to creditors who agree to the terms by Aug. 23, the ministry said.
The grace period for one of the government's Eurobond issues expires on Aug. 10, and therefore, the absence of payment on them would mean a default.
The Ukrainian parliament approved a bill on July 18 granting the government the right to suspend payments on external public debt until Oct. 1.
"Once completed, this restructuring will also pave the way for Ukraine's market re-entry as soon as possible when the security situation stabilizes to fund our country's swift recovery and reconstruction," Finance Minister Serhii Marchenko commented.
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