Reuters: Ukraine is not afraid to miss payment on GDP warrants

Ukraine is not planning to rush into a restructuring of its 2015 government-issued GDP-linked warrants, even if that means defaulting on them, Reuters reports, citing sources familiar with the matter.

According to the agency, this was stated during a meeting with investors in London earlier this week by Yuriy Butsa, Ukraine’s Government Commissioner for Public Debt Management.

"They have made it clear that there is a moratorium in place, and that non-payment on these instruments will not trigger a cross-default on sovereign bonds," one investor told Reuters.

On May 31, a payment of over $500 million is due under the warrants, linked to Ukraine’s 2023 GDP growth rate of 5.3%.

However, the Cabinet of Ministers imposed a moratorium on payments under the GDP warrants last year.

Ukraine’s Ministry of Finance noted that "the GDP warrants were created for an economic context that no longer reflects today’s reality." The Ministry stressed that the 2023 economic growth is not a sign of prosperity, but rather a rebound from the nearly 30% contraction caused by Russia’s full-scale invasion.

The Ukrainian government offered warrant holders two restructuring options, including a full swap into sovereign bonds—but these offers were rejected.

In a comment to Reuters, the Ministry said that Ukraine "is actively engaging with stakeholders and gathering market feedback to determine the optimal path forward."

Nonetheless, Reuters sources say that during the discussions, Butsa emphasized that while a resolution on the warrants is a priority, Ukraine is not afraid to miss the upcoming payment.

• In August 2024, Ukraine reached an agreement with holders of its Eurobonds to write off 37% of its outstanding debt across 13 series of sovereign bonds and to extend the maturity dates from 2024–2035 to 2029–2036.
• After all formalities were finalized, Ukraine issued new bonds for a reduced principal amount—$8.7 billion less than the previous obligations.
• On August 2, 2024, S&P Global Ratings assigned Ukraine a Selective Default (SD) rating. On August 13, Fitch Ratings followed with a Restricted Default (RD) rating.