Kyiv City Council and Ministry of Finance of Ukraine Approve Heads of Terms for an Exchange of City of Kyiv Notes for Sovereign Bonds

On 5 November 2015, the Kyiv City Council adopted a resolution approving the heads of terms for an exchange of its outstanding U.S.$550 million loan participation notes due 2015 and 2016 (the "Notes") for new sovereign bonds (after a principal haircut of 25%) for U.S.$412.5 millionin aggregate principal amount of Ukrainian sovereign bonds due 2019 and 2020 (the "New Bonds").

The Ministry of Finance of Ukraine has also authorised the heads of terms of the exchange, including the terms of the New Bonds, and its support for the Kyiv City Council in the process to effect the proposed exchange. Under the terms of the resolution, accrued interest on the Notes will be capitalised and added to the principal amount of the New Bonds delivered at settlement to exchanging holders of Notes. The New Bonds will have a coupon of 7.75% per annum. Exchanging holders of Notes will also receive GDP-linked securities of Ukraine (fungible with those offered to sovereign bondholders in Ukraine’s debt operation) in a notional amount equal to the 25% principal haircut on their Notes.

Discussions in the past few months between representatives of the City of Kyiv and an ad hoc committee of creditors holding Notes (the “AHC”) with participation of

representatives of the Ministry of Finance of Ukraine did not result in agreement on the terms of a debt restructuring operation. The City of Kyiv and the Ministry of Finance believe that the last offer made to the AHC represented a fair and reasonable compromise, which, however, was not supported by the AHC. 
 

The Kyiv City Council anticipates that a formal debt restructuring operation on the above terms will be launched in the coming weeks."