Ukraine reaches agreement to restructure international debt of more than 20 billion USD

Bloomberg reported on July 22 that Ukraine has reached an agreement with foreign private creditors to restructure more than $20 billion in international debt, which will help Ukraine avoid default in August.

A deal with international bondholders that allowed Ukraine to suspend payments after the outbreak of conflict in the country in 2022 is set to expire this month.

Prime Minister Denis Shmygal and the country’s Finance Ministry said they had reached a basic agreement with the Eurobond Committee of Ukraine, which includes Amundi, BlackRock, Amia Capital, and other investors, who together hold about 25 percent of the bonds. At least two-thirds of them will have to approve the agreement to complete the debt restructuring.

The agreement stipulates that the existing Eurobonds will be exchanged for a new set of Eurobonds with a nominal debt value reduced by 37%. The Commission will waive its claim for $8.67 billion in compensation. The maturity date of the Eurobonds will be extended, with the first repayment of $1.172 billion to be made in 2029.

The Hromadske website notes that without restructuring, the principal debt will have to be repaid in 2024-2029. According to Prime Minister Shmygal, the agreement will save $11.4 billion in debt over the next three years and another $22.75 billion by 2033. The prime minister said that this will allow Ukraine to have more resources for defense, social security and reconstruction.

In early June, Ukraine failed to reach a deal with its creditors on restructuring. The Financial Times reported that the problem was that Ukraine wanted to write off 60% of the value of its debt. Instead, creditors offered a 22% reduction, but Ukraine’s Finance Ministry said that would not achieve the main debt goals.

On July 18, the Verkhovna Rada (parliament) of Ukraine passed a bill allowing the government to temporarily suspend payments on foreign debt if necessary. This right is valid until October 1 to ensure the smooth conclusion of the debt restructuring agreement.