Ukraine agreed on the restructuring of the external debt: details of the agreement
22 July 2024 15:11
Ukraine has reached an agreement in principle with the Committee of Eurobond Owners regarding the comprehensive restructuring of external state commercial debt. This was announced by the Minister of Finance of Ukraine Serhii Marchenko, reports Komersant ukrainskyiKomersant.Info
According to the minister, the deal will save $11.4 billion in debt service over the next 3 years. By 2033, the total savings will be $22.75 billion.
“This is an important step to ensure budgetary stability and preserve the financial resources of Ukraine, which are necessary to continue financing our defense.”
Marchenko noted.
The minister emphasized that the freed funds can be used for defense and social expenses. In addition, the completion of the restructuring agreement will create conditions for Ukraine’s return to the international capital market as soon as possible after the stabilization of the security situation.
Details of the agreement
The agreement provides for significant changes in the structure and repayment conditions of Eurobonds. According to it, the existing Eurobonds will be exchanged for a new package of Eurobonds, which will lead to an initial nominal reduction in the value of the debt by 37% and a reduction in the net present value of the debt by approximately 60%.
Restructuring significantly extends the maturity of bonds. The first repayment of the new bonds amounting to USD 1.172 billion will not take place until 2029, while without restructuring, Ukraine would have to pay USD 9.381 billion (excluding capitalized interest) between 2024 and 2029.
The new Eurobonds will be issued in two types: Bonds A and Bonds B, each of which will have four series maturing in different years between 2029 and 2036. Coupon payment terms for these bonds vary. For Bonds A, the rate will gradually increase from 1.75% in 2024-2025 to 7.75% from 2034. The B bonds will have no coupon payments until the second half of 2027, after which the rate will be 3% until 2033, before rising to 7.75% from 2034.
The agreements reached are supported by the Committee of Creditors of Ukraine and correspond to the target indicators of the IMF Extended Financing Facility program. In particular, the debt-to-GDP ratio is projected to reach 82% by the end of 2028 and decline to 65% by the end of 2033. In addition, the average financing requirement is expected to be at the level of 8% of GDP in 2028-2033.
This restructuring will make it possible to significantly reduce the pressure on the state budget in the coming years and create more favorable conditions for the economic recovery of the country after the end of hostilities.
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