Ukraine extends 'early consent' deadline for debt restructuring

FE Team | Published: August 26, 2024 00:51:27

Ukraine extended an incentivised "early consent" deadline on Friday for international bondholders to back its plan to restructure more than $20 billion of its debt due to what it described as "technical issues", reports Reuters.
The deadline was due to run until Friday, but Ukraine's Finance Ministry said in a statement that it had been pushed back to 5:00 p.m. New York time (2200 GMT) on Tuesday, August 27 after it said some creditors ran into issues.
"Ukraine understands that some holders may be facing technical issues in delivering their participation instructions through their custodians and clearing systems," the ministry said.
Holders who back the deal by the deadline are eligible to receive a incentive payment known as a "consent fee", although with the final voting deadline having always been Aug. 27 anyway it means everyone who now backs it will get it.
For the restructuring to go through at least two-thirds of the overall number of bondholders need to back it, along with a simple majority of 50 per cent for each individual series of bond involved.
If it does, it will slash the face value of Ukraine's bonded debt by more than a third and help bring its overall debt back to a level deemed sustainable enough by the International Monetary Fund and major Western government donors to continue providing their large-scale support.
The "ad hoc creditor committee" of bondholders, which had negotiated the deal with the government, backed the decision to extend the early consent deadline, saying it would help maximise participation and "increase the likelihood of the Invitation's (restructuring's) success."
Ukraine finance ministry did not disclose the share of bondholders that already signed up to the deal, or whether the approval thresholds had been passed.
Negotiations to get it to this stage moved at a breakneck speed in recent months, partly due to the fact a two-year debt payment moratorium creditors granted Kyiv in 2022 expires at the end of the month.
The proposal requires creditors to accept a 37 per cent writedown, or "haircut", to the face value of their holdings. It will save Kyiv almost $11.5 billion over the next three years - the duration of its current IMF programme.
In return, they will get bonds worth 40 cents of their original claim. These will restore interest payments immediately, starting at a rate of 1.75 per cent before rising to 4.5 per cent from 2026, 6 per cent from 2027 and 7.75 per cent from 2034.
They will also receive a bond worth 23 cents, which will not pay interest until August 2027, but will increase to a value of 35 cents if Ukraine's economy is outperforming IMF targets by at least 3 per cent come 2028.
If not enough bondholders back it though, Kyiv will have to go back and rework the deal or come up with some kind of sticking plaster solution like extending the moratorium.