Ukraine announces liability management transactions on its Eurobonds and GDP-linked securities

Today, July 20, Ukraine invited investors of Ukraine’s government Eurobonds and warrants to approve amendments to the conditions of the respective obligations issued on the external market to preserve FX resources for priority expenditures relating to the war, and help mitigate the current USD 5bn monthly fiscal gap.

The Russian invasion of Ukraine poses extraordinary risks to Ukraine’s economic, financial and social fabric and to its territorial integrity. The disruption to fiscal cash flows and increased demands on government resources caused by the war has created unprecedented liquidity pressures and debt servicing difficulties for the Government.  It has been a continuous challenge finding adequate funding sources for Ukraine to cover critical defence, social and humanitarian costs, and to begin planning for post-war reconstruction of the country.

Ukraine’s initiative complements the announced intention of international partners of Ukraine within the G7 and the Paris Club to suspend debt service payment for Ukraine till the end of 2023 with the possibility to extend the suspension by one more year.

One of the objectives of Ukraine’s liability management exercise is to achieve comparability of treatment of Ukraine’s debt and simultaneous processes with all of Ukraine’s creditors, with this proposal being supported by the G7 and Paris Club creditors as reflected in their 20 July 2022 statement.

Since February 24, Ukraine has continued to honor its debt obligations as a responsible issuer in the international capital markets, notwithstanding the brutal security, humanitarian, economic and financial damage to Ukraine inflicted by the Russian war of aggression. This strong commitment has been highly appreciated by the investor community, which has expressed broad support for  Ukraine’s resilience, bravery and fight for democratic values. The liability management transaction launched by Ukraine today follows discussions and feedback received from selected investors who have expressed their solidarity with Ukraine and shared concrete ideas on how they would be prepared to help Ukraine preserve the FX resources necessary to resist and ultimately reverse the Russian invasion and address the profound humanitarian and other consequences of the war.

Ahead of the Launch Date, Ukraine has discussed its liability management plans and needs with a select group of major and representative holders of both its Eurobonds and GDP-linked securities, including Amia Capital, BlackRock, Fidelity International (FIL) and Gemsstock, among others. Pursuant to these discussions, Ukraine has received explicit indications of support for the proposals with respect to both its Eurobonds as well as GDP-linked securities from the aforementioned group of holders.

The specific terms of the requested amendments and timeline for completion of the liability management transactions are described in the announcements of these transactions published today, the full details of which are available for review by eligible investors in the related consent solicitation memoranda for the respective operations.

“Despite the war started by Russia, Ukraine has continued to service its debt obligations and the Ministry of Finance has remained actively engaged in communications with the investment community. We have received many words of support from investors as well as constructive ideas as to how to preserve liquidity for the country. Based on that feedback, today we have launched proactive liability management operations aimed to preserve FX resources in the country.  We are seeking to achieve these objectives in a market-friendly way by seeking a consensual solution with investors. It is important for us to create the conditions for Ukraine to regain access to international financial markets in the shortest possible time after the victory on the battlefield. Such early market access will be critical to funding reconstruction projects for the country after the war.”, - commented Sergii Marchenko, Minister of Finance of Ukraine.