Ukraine agrees to restructure "toxic" GDP warrants, removing them from circulation

Holders of Ukraine’s GDP-linked government derivatives, known as GDP warrants, have agreed to their restructuring, the Ministry of Finance said on Thursday.

There are currently $2.6 billion worth of GDP warrants outstanding.

The restructuring involves the exchange of substantially all outstanding notional amounts of the warrants into a new class of C notes maturing in 2032, totaling $3.497 billion. A small portion — around $34 million — will be exchanged into B notes maturing in 2030 and 2034, in line with the terms of the offer.

As part of the transaction, Ukraine will cancel $604 million worth of state-owned GDP warrants, fully removing the instrument from circulation.

"This restructuring significantly reduces the risks that GDP warrants posed to Ukraine’s public finances," the Finance Ministry said.

According to the ministry’s estimates, total payments under the warrants between 2025 and 2041 could have ranged from $6 billion to $20 billion, depending on economic growth during the post-war recovery.

This excessive volatility stemmed from the design of the instrument. After 2025, payments were uncapped and linked to annual real GDP growth, with no protection against sharp post-crisis rebounds that could generate payments disconnected from economic reality.

Under the original terms, payments were triggered if annual real GDP growth exceeded 3% and nominal GDP surpassed $125.4 billion. Payouts were calculated at 15% of real GDP growth between 3% and 4%, and 40% of growth above 4%.

Ukraine’s economy contracted by nearly 30% in 2022 following Russia’s full-scale invasion. In 2023, GDP grew by 5.3%, triggering a $643 million payment claim under the warrants despite the absence of a genuine economic recovery. That claim has now been fully settled as part of the restructuring.

"This deal will allow Ukraine to save billions of dollars in potential payments during the post-war recovery period. Converting GDP warrants into standard debt instruments with aggregation mechanisms ensures predictability and reduces long-term fiscal volatility. We are removing a toxic instrument that posed a serious risk to public finances and could have undermined recovery and reconstruction," Finance Minister Serhii Marchenko said.

The restructuring is now entering the settlement phase, which is expected to take place in the coming days and be completed by the end of 2025.

• In addition to the $2.6 billion GDP warrants, Ukraine still needs to finalize restructuring of Ukrenergo's sovereign-guaranteed Eurobonds for $825 million (a preliminary agreement was reached in April, but completion was postponed until early 2026) and Cargill's $0.7 billion external commercial loan.
• Main restructuring of external commercial debt in the amount of $20.5 billion (78% of commercial external debt) was completed by Ukraine in September 2024.