Ukraine's Cabinet of Ministers approves terms for Eurobonds restructuring

The relevant resolution No. 865 of July 31 with the conditions for issuing new bonds has been published on the government website.

The agreements provide for the 37% of the debt cancellation with the possibility of 12% recovery in case of reaching a certain level of GDP in 2028.

New bonds will be issued with maturity in 2029-2036, the interest on which will gradually increase from 1.75% in the coming years to 7.75% at the end of the term.

The document also includes Ukravtodor Eurobonds for $700 million issued under state guarantees in exchange for the same conditions.

The resolution introduces a temporary moratorium on payments under Eurobonds for restructuring from August 1.

The Finance Ministry will pay Ukrainian Eurobonds owners a reward in the total amount of up to $246 million, Ukrenergo Eurobonds owners will receive up to $8.75 million, the document said.

Ukraine imposed a foreign debt payment freeze after the war outbreak two years ago. That freeze expires on August 1 with the bond's coupon payment in 2026, and Kyiv needs to restructure its debt in line with International Monetary Fund requirements as part of a $15.6 billion program.

Both the IMF and the country's bilateral creditors, including the United States and the Paris Club, approved Ukraine's proposals.

Ukraine reached an agreement in principle with some of its private creditors in July to restructure more than $20 billion in international debt, which could allow the country to avoid default.

The bondholders' committee accepted nominal losses of 37% of its holdings on 13 bonds, giving up $8.67 billion in claims, according to a statement containing settlement terms.

Ukraine expects to save $11.4 billion over the next three years through a combination of lower coupons and longer maturities.

"After completing this restructuring, Ukraine will also be able to return to the market as soon as possible - as soon as the security situation stabilizes, making it possible to finance the rapid recovery and reconstruction of our country," said Ukraine's Finance Minister Serhiy Marchenko.

The deal was reached with a committee of creditors that included Amundi SA, BlackRock Inc, Amia Capital LLP, and other investors that together represent the bonds quarter. Two-thirds of all bondholders will need to approve the deal to complete the debt restructuring transaction.

The government and creditors have agreed to restructure claims into two rounds - Bond A and Bond B - a similar structure used in Zambia's debt restructuring. Bond B works as a future incentive for bondholders, as it will offer higher payments if Ukraine's nominal GDP growth in 2028 is 3% higher than the IMF forecasts for that year. This one-time test will be conducted in 2029.

Coupon payments on the new Bond A bonds will begin in 2025 at a rate of 1.75% and reach 7.75%, with principal payments beginning in 2029.