Ukraine, Ad Hoc Committee agree on GDP warrant restructuring terms

MOSCOW. Dec 10 (Interfax) - Ukraine, which on December 1 launched an offer for holders of GDP-linked warrants issued at a nominal value of nearly $2.6 billion to swap them at a ratio of 1.34 for Ukraine's new amortized Eurobonds B, which mature in 2030-2032, and to pay a cash reward of up to 7% for the exchange, managed in the past few days to receive support for the proposal from the ad hoc group of creditors after agreeing to a loss reinstatement condition.

"Ukraine and the members of the Ad Hoc Committee have reached agreement on the terms of the invitation and the terms of the new securities offered and described therein, and the Ad Hoc Committee has confirmed its support for the terms of the amended and restated invitation," Ukrainian media quoted the Ukrainian authorities as saying in a statement on the stock exchange.

These amendments were also discussed with GDP warrant holders outside of the Ad Hoc Committee, the statement said.

"The new securities also benefit from additional loss reinstatement," the amended offer said, adding that the new securities shall be immediately due and payable in an amount equal to the loss reinstatement amount calculated pursuant to individual terms and conditions.

These include non-payment of any amount of principal or interest in respect of C-series Eurobonds, declaring a moratorium on or in respect of the new securities or including them in the perimeter of multiple series aggregation.

At the same time, in order to support the constructive long-term relationship with the holders of its existing notes, A and B Notes, issued on August 30, 2024, Ukraine has undertaken in this invitation to execute the deed poll for the benefit of holders of its existing notes.

The early consent deadline, which envisions a small cash incentive for GDP warrant holders who agree to the swap by this deadline, has been moved from December 12 to December 15, while the other conditions remained unchanged.

As reported, Ukraine on December 1 launched an offer for holders of GDP-linked warrants issued at a nominal value of nearly $2.6 billion to swap them at a ratio of 1.34 for Ukraine's new amortized Eurobonds B, which mature in 2030-2032, and to pay a cash reward of up to 7% for the exchange. The basic terms stipulate that 45% of the principal amount of the new Eurobonds B will be redeemed on February 1, 2030 and February 1, 2031, while the remaining 10% will be redeemed on February 1, 2032.

The coupon rate on these bonds will be 4% per annum from issuance until February 1, 2027, and then 5.5% per annum until August 1, 2029, and 7.25% per annum for the remaining period until maturity.

At the same time, Ukraine may initiate their delisting from the exchange even if there is consent from 50% of GDP warrant holders.

At a round of negotiations on November 25-30, Ukraine and the ad hoc committee of holders of GDP-linked warrants made serious progress on the terms of the swap but will continue to work in the coming days to reach full agreement in order to be able to include the results of these consultations in the corresponding amendments to the swap memorandum before December 5.

Ukraine reached an agreement with holders of its GDP warrants in August 2022 to revise the conditions on them, specifically, to defer payments due in 2023 by 14 months, limit the possible amount of payments in 2025 for 2023 at 0.5% of GDP, extend the duration of these instruments by a year, until 2039, and also give Ukraine the right to completely or partially repurchase them in 2024-2027. It was agreed that the payment due on May 31, 2023 for strong economic growth in 2021 would be deferred until August 1, 2024, and it would accrue 7.75% interest per annum.

Under the initial terms of the GDP warrants, which were issued as part of restructuring Ukraine's government debt in 2015 in exchange for Eurobonds for a conditional amount of around $3.239 billion, if GDP growth is lower than 3% for the year, no payments are made on the warrants. If real GDP grows by 3% to 4%, the payment on the warrants is 15% of the amount by which GDP exceeds 3%, and if growth is higher than 4%, another 40% of the amount by which GDP exceeds 4% is paid. However, payments were initially restricted to 1% of GDP from 2021 through 2025. The absence of such restrictions on payments after 2025 in the event of strong GDP growth was criticized by some politicians and experts in the country.

Before the crisis, the Ukrainian Finance Ministry bought back GDP warrants for a total nominal value of $604.262 million. The National Bank of Ukraine also holds GDP warrants worth $43.839 million.