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reductions of about 60% following defaults during wartime.
Value recovery instruments, such as GDP-linked securities, have been utilised in previous debt restructurings in Argentina, Greece, and Ukraine. These instruments offer attractive features but can penalise a country for high and volatile growth if payment caps are too high. Ukraine’s GDP warrants from the 2015 restructuring included payments based on real GDP growth above 3% and 4%, conditions met in 2019, 2021, and 2023. These warrants are likely to be restructured.
“It’s unclear whether the value recovery instruments based on tax revenue targets could be agreed but given that it will come alongside a volatile and uncertain outlook for Ukraine’s economy as post-war reconstruction takes hold, there are likely to be grace periods and high thresholds before payments start,” said Peach.
Finance Minister Serhiy Marchenko urges bondholders to accept bigger losses on Ukraine’s debt restructuring as the country needs to finance its war effort in the third year after Russia’s invasion. * “I know we are asking private creditors for a substantial effort on their part, but without a restructuring, Ukraine will not be able to sufficiently finance our defence and embark on our bold recovery and reconstruction agenda – which we know is a shared common objective across our public and private sector partners,” Marchenko says in a statement on July 17.
The first formal talks on restructuring more than $20 billion of Ukraine’s international bonds ended without a deal as the creditors pushed back against Kyiv’s proposal for debt relief.
With bond payments set to resume this summer, Ukraine is asking debt holders to accept bigger losses that would allow it to finance its defense efforts against Russian aggression and prepare financial resources for economic reconstruction once the war ends.
“As we approach the deadline, we must urge our bondholders to continue productive and good-faith negotiations, with more substantial debt relief to be reflected in their proposals in line with the IMF parameters and Ukraine’s current macro- financial situation,” Finance Minister Serhiy Marchenko said in a statement on July 17.
The talks between Ukraine and a group of bondholders began two weeks ago with private creditors signing non-disclosure agreements to allow for the sharing of sensitive non-public information. Bondholders haven’t received any payments from Ukraine since 2022, when they agreed to a two-year moratorium after Russia invaded. The standstill expires on Aug. 1.
In a separate statement, the ad-hoc creditors’ group said they’re committed to finding a deal, although they considered the haircut proposed by the government to be “significantly in excess of market expectation, which is consistent with a 20% haircut.”
JPMorgan Chase & Co. expects Ukraine’s government and bondholders to meet “in the middle” in their debt restructuring talks after a first round of discussions yielded no results.
86 UKRAINE Country Report July 2024 www.intellinews.com