By Marc Jones
LONDON, Dec 2 (Reuters) – Ukraine’s GDP warrants leapt to their highest level in over four years on Tuesday after the government launched a formal plan to restructure the fixed income instruments that could otherwise cost Kyiv billions of dollars in the coming years.
Ukraine wants to retire the $3.2 billion of warrants and replace them with a new bond with a rising interest rate.
It is also offering investors up to $180 million in cash to back the deal and a consent fee.
Tuesday’s reaction was a near 6 cent jump in the price of warrants. It lifted them to 99 cents on the dollar, their highest level since late 2021 when worries of a Russian invasion were just starting to mount.
Kyiv has been in on-off discussions to replace the warrants for much of the year after their complex terms saw them excluded from a broader $20 billion sovereign bond restructuring struck last year.
Preliminary calculations by investment bank Morgan Stanley on Tuesday estimated the value of deal was “materially” better for warrantholders than the previous offer rejected last month.
It offers $1,340 of new bonds per $1,000 warrants vs £1,260 previously, includes a $20 fixed cash consideration versus $6 previously and provides early consent and other conditional payouts if the deal goes through.
Using “indicative pricing”, the bank estimated the new deal valued the warrants between mid-90s to 100 cents on the dollar.
“This is materially higher than the high-70s/low-80s range under the previous Ukraine offer,” Morgan Stanley said.
DEADLINE PRESSURE
Advisers for the core group of warrantholders that have been negotiating with Ukraine held a webinar at 1700 GMT so that investors could ask questions about the plan.
The Ad Hoc Group, as it is known, has signalled it could back Kyiv’s proposal, but has recommended warrantholders refrain from voting on the offer until an announcement it has said it will make no later than 1200 GMT on Thursday.
A source familiar with the situation told Reuters that while the broad contours of the deal looked promising, Ukraine’s deadline for securing an agreement was tight, especially with issues such as loss reinstatement – protection for investors in the event of another debt default – and aggregation still to be ironed out.
Ukraine’s finance ministry did not immediately respond to a request for comment.
(Reporting by Marc Jones, editing by Karin Strohecker)
