Negotiations with GDP warrant investors continue - Finance Ministry

The Minister of Finance of Ukraine, Serhii Marchenko, reported that negotiations with GDP warrant investors continue.

This is announced in a statement by the Ministry of Finance, Ukrainian News Agency reports.

“The damage caused by russia as a result of its unprovoked and unjustified military aggression against Ukraine is colossal and unprecedented. Economic losses are already estimated at hundreds of billions of euros, and infrastructure throughout the country has suffered significant destruction… GDP warrants were created for an economic reality that no longer exists. Moderate growth in Ukraine’s GDP in 2023 does not indicate economic prosperity - it is only a fragile recovery after an almost 30% drop caused by the russian federation’s full-scale war against Ukraine. These instruments should not hinder our recovery. Our goal is to find a fair and comprehensive solution to this issue,” he said.

Today, April 24, the Ministry of Finance reported that from April 15 to 23, Ukraine held a meeting with members of the Special Committee, which includes institutional investors - owners of about 30% of Ukraine's GDP warrants, at which it presented proposals for restructuring the GDP warrants.

This proposal is formulated in accordance with the parameters of the IMF Program to restore debt sustainability and is consistent with the principle of Comparability of Treatment of the Group of Official Creditors of Ukraine.

Ukraine offered the owners of the GDP warrants two options:

- exchange of warrants for an additional issue of Eurobonds that were issued as part of the restructuring in 2024. According to this option, investors will receive the same set of A and B bonds as the owners of Eurobonds last year, in the ratio: for every 1 unit of warrants - 1.35 units of bonds.

- the second option provides for a change in the terms of the issuance of GDP warrants as follows:

Payments for 2025-2028 are canceled;

The ability to redeem/cancel GDP warrants will be extended until May 2029, while the redemption price will progressively increase from 85 in 2026 to 100 cents in 2029.

The restructured warrants (with payments in 2029-2041) will have the same characteristics as the existing warrants, except for the redemption option;

Holders will receive 36.6 cents of Bonds A and Bonds B for every 100 cents of warrants.

It is important to emphasize that both options are parts of a single exchange transaction (Exchange Offer) and a request to change the terms of circulation (Consent Solicitation).

Investors can choose any of the proposed options, and participation in one of them will be considered support for the restructuring of the terms of the warrants.

This approach is important given the different possible priorities of different holders of GDP warrants and the need to obtain the consent of 75% of the holders by the aggregate nominal value of GDP warrants from the holders of warrants present at the quorum meeting.

The Special Committee, in turn, stated that it unites the holders of more than 30% of the warrants and proposed that Ukraine pay 75% of the payment due in May of this year to holders of warrants for GDP growth in 2023 and issue new C bonds with a rate of 7.75% in the amount of USD 209 million with repayment in February 2029.

Ukraine rejected this proposal.

Ukraine remains committed to constructive negotiations with all holders of GDP warrants in order to find a solution that ensures long-term debt sustainability without jeopardizing the country's reconstruction and recovery.

As Ukrainian News Agency earlier reported, in August 2024, the Cabinet of Ministers decided to temporarily suspend payments on obligations under government derivatives of 2015 (GDP warrants) from May 31, 2025, until a transaction (deal) with them is carried out.

In October 2015, holders of 13 out of 14 issues of sovereign and state-guaranteed Eurobonds for a total amount of USD 14.36 billion and EUR 0.6 billion supported their restructuring.

During the restructuring, Ukraine issued GDP warrants for the amount of Eurobonds written off by creditors.

Under the terms of the issue, investors claim a share of the real GDP growth (taking into account inflation) exceeding 3% in 2019-2038, provided that nominal GDP (excluding inflation) exceeds USD 125.4 billion.

The initiator of the issue was the then Minister of Finance of Ukraine, Natalia Yaresko.

In August 2020, Ukraine redeemed 10% of its GDP warrants issued during the restructuring of external debt with a term of validity until May 31, 2040, for a nominal amount of USD 3.2 billion on the open market.