Ukraine’s bond prices jumped on Monday after the government struck a preliminary deal to restructure roughly $20 billion of the country’s debt with a core group of its bondholders.
The agreement, which should enable the nation to cut the face value of its debt by more than a third, was more favourable than many analysts had expected and sent Ukraine’s bonds up almost 15%, in their biggest single-day move in years.
One bond that provides additional payments when the country’s economy grows leapt nearly 7 cents (XS1303929894=TE) to almost 57 cents in the dollar. Others climbed to between 31 and 37 cents, having been in the mid-to-high teens early last year. (US903724AR33=TE).
If the deal goes through as expected, it will ensure Ukraine avoids what could have been a messy default next month that would have complicated a difficult situation as its war with Russia continues.
Monday’s proposal would see a 37% nominal write-down, or “haircut”, on Ukraine’s international bonds, saving Kyiv $11.4 billion in payments over the next three years – the duration of its current International Monetary Fund (IMF) programme.
In return, bondholders will receive bonds worth 40 cents of their original claim. These will restore interest payments immediately, and the rate will start at 1.75% before rising to 4.5% from 2026, 6% from 2027 and 7.75% from 2034 onwards.
They will also receive a bond worth 23 cents, which will not pay interest until August 2027, but could increase to 35 cents if Ukraine’s economy outperforms IMF targets by at least 3% come 2028.
“Overall bondholders have been treated quite well,” Viktor Szabo, an emerging market portfolio manager at abdrn in London, said.
He said the deal had shown flexibility and that the valuation was closer to an initial proposal put forward by bondholders last month than the government’s original offer.
“It will also be by far the fastest restructuring we have ever seen and are probably ever going to see,” Szabo added, although it comes with a caveat that another might be needed unless the war with Russia ends.
The deal also boosted a bond of Ukrainian state-owned power company, Ukrenergo, which is guaranteed by the Ukrainian sovereign. It jumped over 6 cents (US63718LAA26=TE) to around 45 cents on the dollar according to Tradeweb prices.
Others, however, belonging to state energy company Naftogaz, which were restructured last year, rose a far more modest 0.7 cents to just over 76 cents as the firm’s CEO Oleksiy Chernyshov said another restructuring might be considered for its 2026 debt payments.