Minister’s Comment on the Cleansing Statement published by the Government of Ukraine

The Minister of Finance of Ukraine Sergii Marchenko commented on the cleansing statement published on the London stock exchange by the Government of Ukraine today.

“Strong armies must be underpinned by strong economies to win wars. Ukraine has shown remarkable resilience in the face of Russia’s full-scale invasion, and our economy has outperformed expectations – but it is a fragile balance, which depends on the continuation of consistent, substantial partner support. Timely debt restructuring is a critical part of this support.

Ukraine was constantly engaged with the bondholders since russian unprovoked full-scale invasion started and has worked hard to conduct   good-faith negotiations over the past seven weeks with advisors and the Steering Committee members. This allowed us to incorporate bondholder and market feedback and prepare a constructive and innovative proposal that in our view should  be acceptable to all parties. The proposal is  supported by the IMF and official partners.

I know we are asking private creditors for a substantial effort on their part, but without a restructuring, Ukraine will not be able to sufficiently finance our defence and embark on our bold recovery and reconstruction agenda – which we know is a shared common objective across our public and private sector partners.

As we  approach the deadline, we must urge our bondholders to continue productive and good-faith negotiations, with more substantial debt relief to be reflected in their proposals in line with the IMF parameters and Ukraine’s current macro-financial situation.

We remain fully committed to continuing our constructive engagements to resolve the outstanding differences. We are confident that a satisfactory restructuring agreement can be reached in the upcoming weeks and before the current payment freeze expires.“

Today,  June 17, the Government of Ukraine publicly announced that it has been in restricted discussions with members of the Steering Committee of the Ad Hoc Bondholder Committee, comprised of several major institutional asset managers and other long-term investors representing around 20% of the outstanding amount of Ukraine’s Eurobonds, to test a proposal that works under the IMF baseline scenario to restructure Ukraine’s outstanding Eurobonds before the current payment freeze expires on 1 August 2024. The goal has been to gather market feedback and agree on a structure, which will be acceptable to all parties and will ensure Ukraine can achieve debt sustainability in line with the IMF requirements. 

Ukraine’s proposal consisted of the exchange of the Eurobonds for either (i) a package of fixed income instruments (the “Vanilla Bonds”) and state-contingent instruments (the “SCDIs”) (“Option 1”) or (ii) a package of Vanilla Bonds (“Option 2”). In relation to Option 1, the SCDIs would be converted into Vanilla Bonds based on a single test in 2027 with a face value dependent upon Ukraine’s performance on tax revenues, subject to meeting conditions around real GDP levels projected in the IMF’s baseline scenario. As such, if the revenue test and GDP target is met, the SCDIs would be replaced by fixed-income instruments of Ukraine whose cash flows would be certain. Both options have been designed to deliver holders cash flows during the IMF program period and provide for a nominal haircut ranging between 25 and 60% depending on the country’s recovery over the IMF program period.

During the upcoming weeks the Government of Ukraine will hold consultations with bondholders outside of the Steering Committee and gather feedback from the wider investor community around the structures and instruments that work best for investors. The agreement with investors on the conditions of the restructuring is expected to be reached by the 1st of August.