Ukraine has reached a preliminary agreement with a group of international creditors to restructure more than $20 billion in debt so it can reserve resources for the war and reconstruction.
Ukraine's international creditors agreed to write off more than a third of the nominal value of the debt owed them, saving the country $11.4 billion over the next three years, Ukrainian Prime Minister Denys Shmyhal said.
The government reached the agreement, which marks the first-ever full-scale debt restructuring carried out amid a full-scale war, with investors controlling 22% of the bonds, and investors with an additional 3% also indicating they will support the deal.
"We are on the path to restoring debt sustainability," Shmyhal said on X. "This is an important stage of the debt restructuring process, which will save us $11.4 billion in debt servicing over the next three years and $22.75 billion by 2033. This allows us to free up resources for our defence, social spending and reconstruction."
Under the terms, the government achieved a 37% haircut on the nominal amount of the bonds. It will now issue two series of bonds to replace the existing ones, including one maturing between 2029 and 2036 and a series maturing in 2030-2036. Some of the bonds would pay a 1.75% coupon starting in 2025, and as much as 7.75% starting from 2034.
Rothschild & Co served as financial advisors to the government of Ukraine on the deal and White & Case LLP served as financial advisors, according to a regulatory filing. The bondholders were advised by PJT Partners Limited and Weil, Gotshal & Manges (London) LLP.
The agreement, which still must be approved by two-thirds of the bondholders, comes just before the August expiry of a two-year moratorium on payments of bonds granted after Russia's full-scale invasion of Ukraine in February of 2022.
The deal has the backing of the International Monetary Fund as well as key Ukrainian allies such as the US, Canada and the UK.
Ukrainian Finance Minister Sergii Marchenko called the agreement "an important step to ensure Ukraine maintains budget stability and cash resources needed to continue financing our defence."
"Once completed, this restructuring will also pave the way for Ukraine’s market re-entry as soon as possible when the security situation stabilises to fund our country’s swift recovery and reconstruction," he said in a LinkedIn post.
Ukraine's last debt restructuring came in 2015, after Russia annexed Crimea.
