Ukraine’s debt restructuring: First payment scheduled for 2029

Ukraine has reached an agreement in principle with creditors on the restructuring of USD 23.4 billion in external debt, following which the maturity of Eurobonds will be extended.

The relevant statement was made by the Ukrainian Finance Ministry, an Ukrinform correspondent reports.

“According to the restructuring agreement, the existing Eurobonds in circulation will be exchanged for a package of new Eurobonds with a 37% nominal reduction in the value of the debt at the initial stage and a reduction in the net present value of the debt of around 60%,” the report states.

As the restructuring process is completed, the maturity of the Eurobonds will be extended, and the first repayment of USD 1.172 billion will take place in 2029. By comparison, without restructuring, the principal amount of the debt, totaling USD 9.381 billion (excluding capitalized interest), would be due between 2024 and 2029.

Additionally, in accordance with the agreements reached, new Eurobonds will be issued: four series of Bond A, maturing in 2029, 2034, 2035 and 2036; and four series of Bond B, maturing in 2030, 2034, 2035 and 2036.

Coupon payments on Bond A will be 1.75% in 2024-2025, 4.5% between 2026 and the first half of 2027, 6% between the second half of 2027 and 2033, and 7.75% from 2034 onwards.

As for coupon payments on Bond B, there will be none of them until the second half of 2027. They will amount to 3% between the second half of 2027 and 2033, and reach 7.75% from 2034 onwards.

The agreements reached are supported by the Ad Hoc Creditor Committee and meet the targets of the IMF Extended Fund Facility (EFF) program, in particular: (1) the debt-to-GDP ratio will be 82% by the end of 2028, (2) the debt-to-GDP ratio will be 65% by the end of 2033, (3) the average need for financing will be around 8% of GDP in 2028-2033.

“Currently, Ukraine intends to implement the restructuring agreement as soon as possible, provided the documentation is ready,” the ministry noted.

A reminder that, on July 22, 2024, the Cabinet of Ministers published a statement on the London Stock Exchange, announcing that, following private discussions between July 12 and July 19 2024 with members of the ad hoc creditor committee, it had reached agreement in principle with the Committee on the key financial and non-financial terms of a proposed restructuring transaction in relation to Ukraine’s thirteen series of outstanding Eurobonds, totaling USD 23.4 billion.

The program of Ukraine’s cooperation with the IMF provides for a two-stage restructuring of the external debt, in 2024 and 2026.