By Marc Jones
LONDON (Reuters) -Ukraine’s government said on Thursday that it had not been able to agree to a deal with holders of its GDP-linked warrants to restructure the bond-like debt instruments, although it did intend to continue talking with them.
“Ukraine indicated that it could not accept the Restricted (GDP Warrant) Holders’ Proposal and declined to make any further proposal,” the government said in a statement.
The debt holders hit back saying the proposal Ukraine had put forward had “no prospect of approval” and did not “form the basis for a viable point of engagement”.
They too said they were willing to continue dialogue with Ukraine and laid out their rejected proposal for the next payment due on the debt – Ukraine paying $406 million in cash plus $209 in the form of new bonds.
Kyiv said that it intended to “continue engagement” with the debtholders, and would consider “all available options” to restructure the debt, which is a stipulation of its IMF programme.
Ukraine threw in the $2.6 billion worth of GDP warrants – fixed income securities indexed to economic growth – to sweeten its 2015 debt restructuring following Russia’s annexation of Crimea.
But their complex structure meant they had not been part of last year’s broader $20 billion restructuring that became necessary following Moscow’s full-scale invasion in 2022.
It had been in talks with a group of warrant holders ahead of the next scheduled payout of the instruments of just over $500 million at the start of June. It also comes as Kyiv faces mounting pressure from U.S. President Donald Trump to agree to a ceasefire deal.
“The GDP warrants were designed for a world that no longer exists,” Ukraine’s Finance Minister Sergii Marchenko said in a statement following the breakdown of talks.
He said that the modest rebound in Ukraine’s economy over the last couple of years had done little to mend the near 30% slump caused by Russia’s invasion in early 2022.
“These financial instruments must not become an obstacle to our recovery,” Marchenko said.
The initial market reaction saw the GDP-linked debt, which is denominated in dollars, fall over 2 cents to just over 70 cents on the dollar – or a 30% discount to its face value.
It had recovered roughly half of that drop however by the middle of European trading, to stand at nearly 71.5 cents.
(Reporting by Marc Jones and Chandini Monnappa, additional reporting by Anna Pruchnicka in Gdansk and Libby George in London; Editing by Mrigank Dhaniwala, Alex Richardson and Sharon Singleton)
