Page 17 - bne IntelliNews monthly magazine October 2024

bne October 2024 Companies & Markets I 17
bne:Bond
Ukraine’s bondholders sign off on $20bn debt
restructuring deal
bne IntelliNews
Ukraine’s bondholders formally signed off on September 3 on the deal for restructuring $20bn of debt, which will result in repayments being suspended for several years and will take the pressure off the cash-strapped government.
Kyiv has confirmed that holders of over 97% of its debt agreed to the restructuring plan by the required deadline, allowing the process to move forward. The deal is set to reduce the face value of Ukraine’s international bonds by $11.4bn, or more than a third, over the next three years.
Doing the deal was a key condition set by the International Monetary Fund (IMF) to ensure the country’s debt remains sustainable. An IMF team is due in Kyiv this week to discuss the conditions for releasing the next tranche of Ukraine’s Extended Fund Facility (EFF) support worth billions of dollars.
While Ukraine’s ability to return to international capital markets hinges on the end of the war with Russia, finalising the restructuring represents a “crucial step” for the country ahead of the eventual reconstruction when Ukraine will have to raise billions of dollars from private investors, according to Finance Minister Serhiy Marchenko. He said that the agreement would “ensure Ukraine maintains the budget stability needed to continue financing our defence” and is pivotal in restoring long-term economic stability.
Bondholders had granted a two-year payment suspension in 2022 after the onset of the conflict, but Ukraine found this insufficient, requiring a major bond debt restructuring this year to maintain the flow of IMF loans. The restructuring will reduce the cost of the debt by approximately 60%, with Ukraine resuming interest payments at a significantly lower rate after the suspension, which officially expired in August, UBN reports.
The deal will involve bondholders writing off 37% of their claims, with the debt write-off potentially decreasing to 25% if Ukraine's GDP exceeds IMF targets set for 2028.
Bondholders will receive new bonds worth 40 cents on
the dollar of their original holding, with interest payments restarting immediately. The payments are scheduled to start at 1.75%, rising to 4.5% in 2026, 6% in 2027, and reaching 7.75% from 2034 onwards.
Additionally, bondholders will receive a second bond series worth 23 cents on the dollar, which will not pay interest until August 2027. However, this bond’s value could increase to 35 cents if Ukraine’s economy outperforms IMF targets by at least 3% by 2028. The new bonds are expected to start trading on 30 August, once the final details of the restructuring are settled.
Kyiv has confirmed that holders of over 97% of its debt agreed to the restructuring plan by the required deadline, allowing the process to move forward.
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