09:54 21.09.2015

Laws on Ukraine's commercial foreign debt restructuring published on Sept 19

2 min read
Laws on Ukraine's commercial foreign debt restructuring published on Sept 19

Several laws signed by Ukrainian President Petro Poroshenko on Friday on restructuring of Ukraine's commercial foreign debt were published in the Holos Ukrainy parliament's newspaper on Saturday.

As reported, Ukraine's President Petro Poroshenko on September 18 signed several bills providing for restructuring of the country's sovereign debt that were passed by the Verkhovna Rada, the Ukrainian parliament, on Thursday, September 17.

Ukraine on August 27 announced it had agreed with the creditors' committee on the restructuring of foreign commercial debt worth about $19.3 billion.

The agreement includes an immediate 20% haircut from principal debt and a four-year grace period for the payment of the remaining debt: the deadline was rescheduled from 2015-2023 to 2019-2027. New dollar-denominated eurobonds will be issued in nine tranches that are almost equal in value in exchange of 14 existing issues of eurobonds at an average weighted coupon rate of 7.22% per annum (11 issues of sovereigns and three issues of Fininpro's government-backed loan participation notes) and several government-guaranteed loans (Ukravtodor, Pivdenne design bureau, and Ukrmedpostach). The new bonds will be paid every year in 2019-2027 at a rate of 7.75% per annum. Interest accrued on the existing securities prior to the planned date of new issues will be securitized into new eurobonds.

Besides, eurobond holders will be given 20-year government derivatives proportionally to their share in the total debt to be restructured. Yields will be paid in cash, in U.S. dollars, in amounts depending upon future dynamics of Ukraine's real GDP growth. If annual GDP growth is 3%, no income will be paid on the derivatives. If the real GDP increases by 3-4%, these securities will yield 15% of the surplus of GDP growth above the 3% level, and once it is over 4%, the same plus 40% of the surplus of GDP growth over 4%.

The terms and conditions regarding the governmental derivatives will only be effective after Ukraine's nominal GDP increases 1.5 times to reach $125.4 billion (the current IMF forecast for GDP in 2019 denominated in U.S. dollars, as equivalent to UAH 3.183 trillion at the rate of the current forecast). Also, there is a condition that the amount of payments under VRI will be limited to 1% GDP from 2021-2025.

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