Ukraine completes restructuring of 2015 GDP warrants: what it means for debt and budget
25 December 21:23
On December 24, Ukraine announced the completion of the restructuring of the so-called GDP warrants issued in 2015, totaling $2.635 billion. The Ministry of Finance reported that the transaction was supported by more than 99% of investors, and all relevant derivatives were canceled, "Komersant Ukrainian" reports.
What are GDP warrants?
GDP warrants are debt instruments linked to economic growth. They were introduced after the 2015 debt crisis and stipulated that in the event of a rapid economic recovery, Ukraine would have to make significant payments to investors.
Under the new terms, the warrant holders received government bonds: Series C securities maturing in 2032 for $3.497 billion, as well as Series B bonds maturing in 2030 and 2034 for relatively small amounts. In exchange, all GDP warrants were finally written off.
What the Ministry of Finance says
The Ministry of Finance explains that this agreement should reduce budgetary risks and make public finances more predictable in the context of a full-scale war with Russia. According to the Ministry, without the restructuring, payments on GDP warrants in 2025-2041 could have amounted to between $6 billion and $20 billion, depending on the rate of economic growth.
The agreement is also important in terms of cooperation with the International Monetary Fund. The Ministry of Finance notes that the restructuring is in line with Ukraine’s debt targets under the IMF program and was agreed with the expectations of the official creditors’ group.
The deal is another element of a broader strategy to manage public debt during the war. Earlier, international rating agencies, including Fitch, had signaled an improvement in Ukraine’s solvency ratings on the back of the agreement with creditors.
White & Case acted as a legal advisor to the government in this transaction, and Rothschild & Co. as a financial advisor. The government emphasizes that further debt policy will depend on both the course of the war and the pace of economic recovery after it.
