Ukraine Resumes Negotiations on Debt Restructuring for GDP Warrants

Ukraine has resumed negotiations with investors regarding the restructuring of debt related to GDP warrants. A group of owners of these securities, which includes hedge funds Aurelius Capital Management LP and VR Capital Group, signed non-disclosure agreements this week. This allows the parties to begin what are known as “limited” negotiations, which involve the exchange of non-public information and temporary restrictions on the execution of warrants. This approach is dictated by the market sensitivity surrounding the topic of restructuring.

This is reported by AgroReview

Dynamics of GDP Warrant Values and Progress of Negotiations

In recent trading days, Ukraine’s GDP warrants were valued at over $0.91 per $1, indicating an increase in their value of approximately 20% since the beginning of the year. This reflects investor confidence in the future prospects of agreements between Ukraine and the securities holders.

In October-November, a second round of negotiations took place between the Ministry of Finance of Ukraine and a special committee of institutional investors who control about 35% of the GDP warrants. However, the parties again failed to reach a compromise on the terms of debt restructuring. The first round occurred in April of this year but ended without results. The Ministry of Finance expressed hopes of finding a joint solution by the end of the current year.

What are GDP Warrants and What are Their Terms

Ukraine’s GDP warrants are securities with a nominal value of $2.6 billion, issued under the debt agreement of 2015. At that time, investors agreed to write off 20% of Ukraine’s external debt, and payments on the warrants depend on the country’s GDP growth rates from 2019 to 2038. Actual payments to warrant holders occur two calendar years after the corresponding period of economic growth – that is, in 2021–2040.

“The group of investors in these securities, led by hedge funds, signed non-disclosure agreements this week to enter into so-called ‘limited’ negotiations. Such negotiations involve the exchange of non-public information and temporary restrictions on the sale of securities, as the topics under discussion may be sensitive to the market.”