Ukraine and a group of creditors led by hedge funds Aurelius Capital Management LP and VR Capital Group have failed to agree on the restructuring terms for $3.2bn worth of debt linked to economic growth, ahead of next month’s payment, according to a report by Bloomberg.
The government and the holders of the so-called GDP warrants held talks between 15 and 23 April, according to a statement published on the London Stock Exchange on Thursday.
“Ukraine intends to continue engagement with holders of the warrants and consider all available options” for their restructuring, the government said in the statement.
The securities, which mature in 2041, weren’t included in last year’s $20bn Ukraine debt restructuring deal. The GDP warrants reward investors when real economic expansion tops 3% in a year. A payment of more than $500m is due on 31 May and is linked to expansion in 2023.
The GDP warrants declined on the news, dropping to as low as 69.5 cents on the dollar before trimming losses. The securities, which traded at 73 cents on Wednesday, peaked at around 88 cents in February. Ukraine’s dollar bonds were the bottom performers among emerging-market peers, according to data compiled by Bloomberg. The zero-coupon 2035 note fell 1.8 cents to 51.3 cents on the dollar.
Ukraine offered creditors two options, including full exchange for sovereign bonds, through the reopening of existing notes. Investors were willing to restructure only the May payment, demanding more than $400m in cash and the conversion of more than $200m into new bonds.
In a separate statement, the creditor committee said that a “wholesale restructuring of the warrants is neither appropriate nor necessary,” and added that creditors remain willing to engage in relation to the 2023 payment.
The ad hoc group represents in excess of 30% of the outstanding warrants, according to the statement.
