Page 66 - UKRRptSept22

The government instructed the Ministry of Finance to delay the payments on Eurobonds for two years and GDP warrants for one year last month, due to the war and a large shortage of funds. Kyiv needed approval from holders of its GDP warrants, who voted in favour on August 10, although a statement released on August 9 showed the preliminary results of the vote.
"Approximately 93% of Holders of the Notional Amount of Securities outstanding were represented for quorum purposes and approximately 91% of such Holders had voted in favour of the Extraordinary Resolution," the statement said, Reuters reported.
The payment freeze on its Eurobonds will be considered at the next meeting. More than 2/3 of bondholders of all issues need to support the restructuring of the payments, and over half of each issue.
Ukraine is running a deficit of between $4bn and $5bn a month and is rapidly running out of money. The potential $20bn debt default of Ukraine has caused concerns.
“Default will have a longer term impact on Ukraine – higher borrowing costs, limited market access, and less private sector involvement at the go when the war eventually ends and the Ukraine reconstruction begins,” said Timothy Ash, senior strategist at Bluebay Asset Management.
Fears that Ukraine will default arose earlier in July when one of the country's largest state-owned companies, Naftogaz, asked bondholders for a two-year payment freeze on $1.4bn of its bonds. Bondholders were advised by legal firm Dechert to reject the request, as they still viewed the company as a profitable going concern.
The government also asked other state companies such as State Automobile Roads Agency (Ukravtodor) and power company Ukrenergo to defer bond payments for two years. As a result, several state companies have been downgraded by the rating agency Fitch, including Naftogaz, Ukrenergo and Ferrexpo.
Is this a default?
Creditors could ask whether a default insurance known as credit default swaps (CDS) should kick in, as a deferral of payments might be considered a credit event by the International Swaps and Derivatives Association (ISDA).
Investors are sitting on about $221 million of insurance on Ukraine’s debt, according to Depository Trust & Clearing Corporation (DTCC) data on the CDS.
Credit rating agencies might also classify this as a "selective default" or "default".
"A contractual default, a credit event and a credit rating default are three different albeit related concepts," Olivares-Caminal said. "Incurring any of the three doesn't mean that the other two will trigger."
66 UKRAINE Country Report September 2022 www.intellinews.com