NOT FOR DISTRIBUTION IN ANY JURISDICTION IN
WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE
LAW.
17 June
2024
Press
Release - For Immediate Release
Kyiv,
Ukraine: The Government of Ukraine
("Ukraine") announces today
that over a twelve-day period from 3 to 14 June 2024,
representatives of Ukraine held meetings with members of the ad hoc
creditor committee (the "Ad Hoc
Creditor Committee") comprised of a
number of major institutional asset managers and other long-term
investors in Ukraine representing around 20% of the outstanding
amount of Ukraine's Eurobonds, as well as with certain other
holders of Eurobonds ("Investors") on a bilateral basis.
Ukraine entered into the consultation
period with the Ad
Hoc Creditor Committee and the Investors to discuss, under
non-disclosure agreements, the potential terms of a restructuring
of Ukraine's thirteen series of outstanding Eurobonds (the
"Eurobonds") listed in
Annex A.
Ukraine was joined by its legal and
financial advisors, White & Case LLP and Rothschild & Co,
respectively, and the Ad Hoc Creditor Committee were joined by
their legal and financial advisors, Weil, Gotshal and Manges
(London) LLP and PJT Partners (UK) Ltd, respectively.
As part of the ongoing restructuring
process, the consultation period was designed to enable Ukraine to
deliver to the Ad Hoc Creditor Committee and the Investors a
restructuring proposal and to enable the Ad Hoc Creditor Committee
and the Investors to directly engage and exchange ideas with
Ukraine and its advisors. In addition, the Ad Hoc Creditor
Committee were provided the opportunity to directly engage with
staff of the International Monetary Fund ("IMF") and the Secretariat of the Group
of Creditors of Ukraine ("GCU").
As detailed in Annex B, Ukraine's proposal (the "Sovereign Proposal") consisted of the exchange of
the Eurobonds for either (i) a package of fixed income instruments
(the "Vanilla Bonds") and
state-contingent instruments (the "SCDIs") ("Option 1") or (ii) a package of Vanilla
Bonds ("Option 2"). In
relation to Option 1, the SCDIs would be converted into Vanilla
Bonds based on a single test in 2027 with a face value dependent
upon Ukraine's performance on tax revenues, subject to meeting
conditions around real GDP levels projected in the IMF's baseline
scenario. As such, if the revenue test and GDP target is met, the
SCDIs would be replaced by fixed-income instruments of Ukraine
whose cash flows would be certain. Both options have been designed
to deliver holders cash flows during the IMF program period and
provide for a nominal haircut ranging between 25 and 60% depending
on the country's recovery over the IMF program period. The
Sovereign Proposal also incorporated certain legal terms, including
a "loss reinstatement" provision and a "most-favoured creditor"
clause.
Prior to entering into discussions
with the Ad Hoc Creditor Committee and the Investors, Ukraine had
shared the Sovereign Proposal with IMF staff and the GCU. Both
Options under the Sovereign Proposal were assessed on a preliminary
basis by IMF staff as consistent with the debt sustainability
objective of Ukraine's IMF Extended Fund Facility (the
"EFF") under the baseline
macroeconomic framework, conditional on the continued validity of
the GCU agreement and the authorities' restructuring strategy.
Specifically they were assessed to be consistent with the December
2023 IMF DSA principal targets of (1) debt-to-GDP ratio of 65% by
end 2033 and (2) an average GFN-to-GDP ratio of 8% in the
post-program period of 2028-2033. The proposal also aimed to
respect the complementary targets of (1) debt-to-GDP ratio of 82%
of GDP by 2028, and (2) flow relief on external debt service
obligations of 1-1.8% of GDP per year over the IMF program period
(collectively, the "IMF DSA
targets"). The Sovereign Proposal and overall restructuring
strategy also achieves compatibility with the IMF DSA targets in
scenarios below the IMF baseline, as required under the IMF's
Exceptionally High Uncertainty framework, through Ukraine's
delivery of specific policy commitments. IMF staff noted that these
were preliminary assessments, and that IMF staff would provide
final assessments only after the parties had reached a tentative
agreement in principle. The Sovereign Proposal was also assessed as
compliant with the Comparability of Treatment principle of the GCU,
to ensure acceptability by official creditors and donors of
Ukraine, as confirmed by the GCU.
Ukraine also briefed the Ad Hoc
Creditor Committee and the Investors that the baseline
macroeconomic framework reflecting discussions for the
4th review of the EFF would be less favourable as
compared to the macroeconomic framework reflected in the
3rd review of the EFF.
During the discussions Ukraine
highlighted that the cashflows in respect of the GDP-linked
securities of Ukraine (the "Warrants") are included in the IMF DSA
and, therefore, will need to be taken into account in the design of
any restructuring solution for the Eurobonds that meets the IMF DSA
targets. In this connection Ukraine proposed removal of events of
default related to or referencing the Warrants from the new
instruments to be delivered as part of the Sovereign Proposal. Ad
Hoc Creditor Committee did not respond to this element of the
Sovereign Proposal.
During the course of the
consultation period, Ukraine requested feedback from the Ad Hoc
Creditor Committee and the Investors on the Sovereign Proposal. The
Ad Hoc Creditor Committee provided their feedback to the Sovereign
Proposal together with an indicative proposal (the "Committee Proposal").
The Committee Proposal is set out in
Annex C. It consisted of two index-eligible
debt instruments: a bond with a fixed 7.75% coupon on 40% of the
Eurobond principal and accrued interest (the "Market Bond") and a bond with variable,
step-up coupons on 40% of the Eurobond principal and accrued
interest (the "Recovery
Bond"). The Committee Proposal would deliver a 20% nominal
haircut and allow for the potential full recovery of the
concessions made in certain circumstances where there is
performance above the IMF baseline. As part of its feedback, the Ad
Hoc Creditor Committee indicated general agreement on the inclusion
of a loss reinstatement clause in the new bond documentation and
highlighted the need for further clarity relating to the assessment
criteria for Comparability of Treatment principle.
Ukraine responded to the Committee
Proposal (the "Sovereign
Response"), which included feedback received from IMF staff
and the GCU secretariat on the Committee Proposal, stating that
this proposal would not be compliant with the objectives of the
debt operation. Respectively, IMF staff determined on a preliminary
basis that the Committee Proposal would breach the IMF DSA targets
under the baseline macroeconomic framework, while the GCU
secretariat communicated that any cashflows to private creditors
during the IMF program period needed to remain symbolic in order to
meet Comparability of Treatment requirements.
At the same time, as part of the Sovereign Response
and to elaborate further on index-eligible options, Ukraine
presented certain illustrative structures, including bonds with a
step-up and/or step-down structure, zero coupon bonds and
macro-linked bonds, with a different composition of nominal haircut
and coupon levels - haircut levels being comprised in the range of
40 to 60 cents. In particular, Ukraine presented three illustrative
structures: (i) in response to the Committee's Proposal, an
illustrative amended base structure comprised of "market bonds" and
"recovery bonds" (the "Amended
Base Structure"); and (ii) two illustrative scenarios
expanding on Ukraine's Option 1 and Option 2 set out in the
Sovereign Proposal with contingent features, ("Alternative 1" and "Alternative 2", respectively).
·
Amended Base Structure:
The Amended Base Structure was compatible with the 3rd
IMF program review figures, did not account for the 4th
IMF program review figures and comprised of: (i) a "market
bond" on 30% of the Eurobond principal and accrued interest with a
coupon of 4% between 2024-2027 and 6% from 2028; and (ii) a
"recovery bond" on 30% of the Eurobond principal and accrued
interest with zero coupon between 2024-2027, 3% from 2028-2033 and
6% from 2034 onwards.
·
Alternative 1: Alternative
1 presented a illustrative structure comprised of: (i) Vanilla
Bonds on 40% of the Eurobond principal and accrued interest with a
coupon of 1% from 2024-2025, 3% from 2026-2027 and 6% from 2028
onwards; and (ii) an SCDI with an illustrative recovery of up to
35% of the Eurobond principal and accrued interest, with a coupon
of 6% from 2028 if a single test was met in 2028.
·
Alternative 2: Alternative
2 presented an illustrative structure comprised of: (i) Vanilla
Bonds on 30% of the Eurobond principal and accrued interest; and
(ii) an SCDI which presented a potential illustrative recovery of
10% on the Eurobond principal and accrued interest initially and a
maximum potential recovery of 45%, but could also be adjusted
downwards upon a single test in 2027, such that the illustrative
recovery could be zero.
These structures did not constitute a proposal from
Ukraine and were not vetted by the IMF or the GCU, but demonstrated
Ukraine's willingness to consider alternative structures as long as
they deliver the financial relief needed to meet the IMF DSA
targets. Ukraine also highlighted that those illustrative
structures and associated economics were based on the
3rd IMF programme review figures and should be likely
revised downward when taking the 4th IMF programme
review figures into consideration. Ukraine also highlighted that
the GCU secretariat has only approved any symbolic cashflows to
private creditors during the IMF program period in order to meet
Comparability of Treatment requirements.
Towards the end of the consultation
period, the Ad Hoc Creditor Committee subsequently responded to
these illustrative structures by putting forward an adjusted
proposal (the "Adjusted Committee
Proposal"). This is set out in Annex
D. The Adjusted Committee Proposal increases the nominal
haircut to 22.5% through certain adjustments to the Recovery Bond,
while also introducing a split Cash/PIK coupon structure on the
Market Bond during the IMF program period, whereby 7.25% is payable
in cash and 0.5% is paid-in-kind (PIK) over the 2024-2027 period,
with a full cash coupon of 7.75% payable thereafter. The Adjusted
Committee Proposal continues to allow for the potential full
recovery of the concessions made in certain circumstances where
there is performance above the IMF baseline, as described in the
original Committee Proposal.
The Adjusted Committee Proposal was
shared with IMF staff, which assessed it on a preliminary basis as
non-compliant with the IMF DSA targets. It was also shared
with the GCU secretariat, which reiterated that any cashflows
during the IMF program period needed to remain symbolic.
Although Ukraine and the Ad Hoc
Creditor Committee did not come to an agreement on restructuring
terms during the consultation period, Ukraine and the Ad Hoc
Creditor Committee will continue engagement and constructive
discussions through their respective advisors, and Ukraine will
continue bilateral discussions with other Investors, with a view to
making further progress and reaching an agreement in principle at
the earliest opportunity.
************************
This announcement
is made by the Government and constitutes a public disclosure of
inside information under Regulation (EU) 596/2014 (16 April
2014).
Annex A
Eurobonds
|
Instrument
|
Coupon
|
Maturity
|
|
USD 912 m
7.75% note
|
7.75%
|
Sep-24
|
|
USD 1.355bn
7.75% note
|
7.75%
|
Sep-25
|
|
USD 750m
8.994% note
|
8.994%
|
Feb-26
|
|
USD 1.34bn
7.75% note
|
7.75%
|
Sep-26
|
|
USD 1.33bn
7.75% note
|
7.75%
|
Sep-27
|
|
EUR 1bn
6.75% note
|
6.75%
|
Jun-28
|
|
USD 1.32bn
7.75% note
|
7.75%
|
Sep-28
|
|
USD 1.31bn
7.75% note
|
7.75%
|
Sep-29
|
|
USD 1.6bn
9.75% note
|
9.75%
|
Nov-30
|
|
USD 1.75bn
6.876% note
|
6.876%
|
May-31
|
|
EUR 1.25bn
4.375% note
|
4.375%
|
Jan-32
|
|
USD 3bn
7.375% note
|
7.375%
|
Sep-34
|
|
USD 2.6bn 7.253% note
|
7.253%
|
Mar-35
|
Annex B
Sovereign Proposal
This indicative term sheet sets out the key
commercial terms upon which Ukraine has proposed to restructure the
Eurobonds (the "Transaction")[1].
This term sheet is not exhaustive and does not constitute or imply
a commitment by Ukraine to a restructuring transaction. The
completion of the Transaction will be subject, among other things,
to execution of definitive documentation and satisfaction of
customary closing conditions.
The proposed Transaction consist of the
exchange of Eurobonds for (i) a package of two types of new
securities: the Vanilla Bonds and a contingent instrument in the
form of revenue-based securities (the "Ukraine Recovery Instrument" or
"URI" and together with the
Vanilla Bonds, the "New
Securities") or (ii) a package of new Vanilla Bonds, in each
case as summarized below. The offer is designed to comply with the
parameters of Ukraine's IMF Extended Fund Facility, and
specifically with the December 2023 IMF DSA targets of (1)
debt-to-GDP ratio of 82% by end 2028, (2) debt-to-GDP ratio of 65%
by end 2033 and (3) an average GFN-to-GDP ratio of 8% in the
post-program period of 2028-2033.
The terms of the Vanilla Bonds are calibrated
to comply with the IMF's baseline scenario while the Ukraine
Recovery Instruments are designed to provide upside value to
holders of Eurobonds in the event of Ukraine's outperformance of
the central government tax revenue indicator (excluding social
security contributions) vis-à-vis the IMF's baseline scenario,
reflecting greater tax mobilization. A control variable will be the
average real 2025-2026 GDP recovery to at least 85% of the pre-war
real GDP level (2021).
The Exchange Offer memorandum will include a
specific risk factor alerting holders to the risk that, in the
event that Ukraine underperforms vis-à-vis the IMF's baseline
scenario, a further debt treatment of the Vanilla Bonds will be
required. See "Risk Factor
related to Vanilla Bonds" below.
|
Structure of Exchange Transaction
|
The debt restructuring will be consummated through an
exchange offer open to all eligible holders of Eurobonds. Ukraine
will offer to exchange the Eurobonds into 5 series of new Vanilla
Bonds and, in the case of Option 1, also 5 series of new URIs
(together, the "New
Securities").
At settlement of the exchange transaction, a holder
of a series of Eurobonds will receive one or more series of Vanilla
Bonds and, in the case of Option 1, one or more series of
URIs, pursuant to an allocation schedule to be set forth in the
exchange documentation. In the case of Option 1, the parties may
consider a mechanism for voluntary reallocation of Vanilla Bonds
and URIs among participants in the exchange transaction to reflect
the preferences of such participants, subject to the aggregate
nominal amount of Vanilla Bonds and notional amount of URIs issued
at settlement not being increased.
|
|
Currency
|
United States Dollars
|
|
Governing Law and Jurisdiction
|
English law and the English courts
|
Indicative term sheet -
Option 1
The Vanilla Bonds
|
Principal Amount
|
Holders will receive US$400 principal amount of
Vanilla Bonds for each US$1,000 in principal amount[2] of Eurobonds exchanged and interest accrued as a
result of the 2022 restructuring amendments to the terms of the
Eurobonds.
Each series of Vanilla Bonds will be issued in an
aggregate face amount sufficient to ensure adequate liquidity and
index eligibility, all of them being benchmark size.
The commercial terms of the Vanilla Bonds are
designed to meet programme debt-related targets under the current
IMF baseline scenario.
|
|
Maturities and Principal
Amortization
|
The Vanilla Bonds will mature in 2034, 2035, 2036,
2038, and 2040, bullet repayment at maturity.
|
|
Coupon
|
Interest shall be payable on each series of
Vanilla Bonds on a semi-annual basis in arrear, on [December 15 and
June 15] of each year until maturity, at the following annual rates
for interest payment dates falling in the specified calendar
year:
H2 2024 -2025:
1.00%
2026-2027:
3.00%
2028 to maturity:
6.00%
Interest will accrue from the issue date of
each series of Vanilla Bonds to the relevant maturity date, and
will first be paid on [December 15], 2024.
|
|
Risk Factor related to the Vanilla
Bonds
|
The Exchange Offer Memorandum will include a specific
risk factor stipulating that:
"The terms of the Vanilla Bonds, including the
principal amount, amortization profile, maturity date, and interest
rate on each series of Vanilla Bonds, have been calibrated to allow
Ukraine to reach the debt sustainability targets set forth in its
Extended Fund Facility with the IMF approved on March 31, 2023
("EFF") under the baseline
macroeconomic framework approved by the IMF Executive Board on
[June ___, 2024 in its fourth review] of the EFF (the "baseline scenario"). The baseline
scenario is subject to significant risks, including those arising
from the exceptionally high uncertainty stemming from the war,
potential policy slippages and delays or shortfalls in external
financing. The IMF Executive Board in its [fourth review] also set
forth a downside macroeconomic framework (the "downside scenario"), as required under
the IMF's policies for lending "under exceptionally high
uncertainty", which takes into account the impact of the
realization of certain of these risks.
In the event that Ukraine underperforms vis-à-vis the
baseline scenario, including but not limited to a circumstance
where the IMF's "downside scenario" materializes, a further debt
restructuring exercise affecting the Vanilla Bonds will likely be
required. Such further treatment of the Vanilla Bonds may include
reductions in principal amount, extension of maturities, and/or
reduction in the interest rate applicable to each series of Vanilla
Bonds, in order to ensure debt sustainability targets in the EFF
are achieved under the then-prevailing macroeconomic conditions and
outlook. There can be no assurance in these circumstances that
Ukraine will be in a position to perform any or all its obligations
under the Vanilla Bonds unless or until such further restructuring
is implemented."
|
|
Language expected to be included in Letter of
Intent to the IMF / IMF Memorandum of Economic And Financial
Policies of Ukraine
|
"Our international partners have assured us of their
continued support to help ensure that debt sustainability is
restored, and the program is fully financed. As part of our efforts
to restore debt sustainability we announced on March 24, 2023, the
intention to undertake a restructuring of our external public debt,
in line with program parameters, and our plan remains to reach
agreement with commercial creditors before the end of August 2024.
Should the case arise where the macroeconomic and debt outlook
worsen, we also commit to undertaking a further external commercial
debt treatment as needed to restore debt sustainability in line
with program parameters".
|
|
[Loss Reinstatement
|
In March 2023, the Group of creditors of Ukraine
("GCU") agreed to provide
an additional official sector debt treatment to contribute to
restore debt sustainability of Ukraine upon the earlier to occur of
(i) the end of the period of Exceptionally High Uncertainty and
(ii) the end of the IMF program in 2027 (the "GCU treatment"). Such additional debt
treatment will be provided prior to any further required treatment
of the Vanilla Bonds.
In the event that application by the GCU of
Comparability of Treatment ("CoT") principles at the time of the GCU
treatment requires that a further treatment of commercial claims be
implemented, then Ukraine has committed to undertake such further
debt treatment of commercial claims (the "further debt treatment"). In this
circumstance, loss reinstatement provisions embedded in the terms
of the Vanilla Bonds shall reinstate the original (pre-2022
restructuring) claim of bondholders plus accrued and unpaid
interest thereon up to the date of the further debt treatment less
the aggregate amount of interest paid on the Vanilla Bonds up to
the date of the further debt treatment, provided that the loss
reinstatement provisions shall only be valid in relation to a
further debt treatment that is confirmed as necessary based on the
GCU treatment and CoT and will expire should no such further debt
treatment be required at that time.]
|
|
No Warrants related Events of
Default
|
The Vanilla Bonds (unlike certain series of the
Eurobonds) will have no events of default related to or referencing
the Warrants.
|
|
Most-favoured
creditor clause
|
Ukraine shall not enter into any compromise or
agreement in respect of commercial debt claims (including the
sovereign guaranteed commercial debt of Ukravtodor and Ukrenergo)
that would provide to holders of such claims a material
difference in recovery value (to be defined) than that received by
holders of Eurobonds participating in the proposed debt exchange
without offering substantially similar terms (or other
consideration of equivalent value) on a rateable basis to all
holders of Vanilla Bonds issued in the proposed Debt Exchange.
|
|
[Ad Hoc Creditor Committee adviser's
fees
|
The exchange documentation will provide a mechanism
for payment or reimbursement of all reasonable fees, costs and
expenses (including legal and financial adviser fees) of the Ad Hoc
Creditor Committee on mutually satisfactory terms and in line with
the market standard by way of deduction of such fees from the first
coupon payment on the Vanilla Bonds or otherwise.]
|
The Ukraine Recovery Instruments
|
Structure of Ukraine Recovery
Instruments
|
The Ukraine Recovery Instruments shall constitute a
new type of security of the Issuer that provides the holder with
the right to receive on the Exchange Date, upon satisfaction of the
Exchange Condition (as defined below), new index eligible Vanilla
Bonds of the Issuer[3], in a principal amount of
up to the Notional Amount of the Ukraine Recovery Instrument (i.e.
up to US$1,000 in principal amount of Vanilla Bonds for every
US$1,000 of the Notional Amount), allowing further liquidity of the
instruments.
Prior to being exchanged for a new Vanilla Bonds, the
Ukraine Recovery Instrument shall not represent a debt obligation
of the Issuer and shall not entitle their holders to any principal
or interest payments.
|
|
Notional Amount of Ukraine Recovery
Instruments
|
Holders will receive a Notional Amount of US$350 in
Ukraine Recovery Instrument for every US$1,000 in principal amount
of Eurobonds exchanged and interest accrued as a result of the 2022
restructuring amendments to the terms of the Eurobonds.
|
|
Cancellation of Ukraine Recovery
Instruments
|
The Ukraine Recovery Instruments shall be cancelled
on [September][●], 2027[4] (the
"Cancellation Date"),
provided that one of the following has occurred: (i) they have been
exchanged for the relevant amount of the Vanilla Bonds of the
Issuer on the Exchange Date as further described herein, (ii) the
Exchange Condition has not been met or (iii) the Exchange Principal
Amount (as defined below) is zero.
|
|
Principal Exchange
|
Subject to the satisfaction of the Exchange Condition
(as described below), holders of Ukraine Recovery Instruments will
receive Vanilla Bonds in a principal amount equal to the Exchanged
Principal Amount per US$1,000 of Ukraine Recovery Instruments no
later than [June ] [●], 2027 (the "Exchange Date")[5], and the Ukraine Recovery Instruments shall be
cancelled on the Cancellation Date. Ukraine will undertake under
the terms of the Ukraine Recovery Instruments to publicly report
not later than 40 days after the Exchange Control Variable Test
Date whether the Exchange Condition has been met (the "Exchange Condition Reporting
Undertaking").
If the Exchange Condition is not met, the right of
holders of Ukraine Recovery Instruments to receive new Vanilla
Bonds shall lapse and the Ukraine Recovery Instruments shall be
cancelled on the Cancellation Date.
Ukraine will undertake under the terms of the Ukraine
Recovery Instruments to publicly report on an annual basis
Ukraine's central government average tax revenues, excluding social
security contributions, for fiscal years 2024, 2025 and 2026 to
allow the holders of Ukraine Recovery Instruments to assess the
evolution of such metric ahead of the Exchange Date (if any) (the
"Tax Revenue Reporting Undertaking").
"Exchanged Principal Amount" means a
principal amount of Vanilla Bonds in US dollars which holders of
Ukraine Recovery Instruments will be entitled to receive on the
Exchange Date per US$1,000 of Ukraine Recovery Instruments. Such
amount shall be equal to the lower of:
· 1 and
· the
difference between the Average Realized Tax Revenues and the
Average IMF Projected Tax Revenues (converted into USD at the
exchange rate equal to the UAH / USD average over 2026), multiplied
by a coefficient of 1.10 and divided by the aggregate notional
amount of the outstanding Ukraine Recovery Instruments,
and multiplied by US$1,000, provided that if the
Average Realized Tax Revenues is equal or lower than the Average
IMF Projected Tax Revenues, holders of Ukraine Recovery
Instruments shall not be entitled to receive any Vanilla Bonds.
"Average
Realized Tax Revenues" shall mean the arithmetic average of
Ukraine's central government tax revenues, excluding social
security contributions, for fiscal years 2025 and 2026, denominated
in UAH as published by [the IMF or the Ukrainian Tax statistics
Authority] on or around [April 2027].
"Average
IMF Projected Tax Revenues" means the arithmetic average of
Ukraine's projected central government tax revenues (excluding
social security contributions) for fiscal years 2025 and 2026,
denominated in UAH as included in the baseline forecasts for such
years [approved by the IMF Executive Board at the time of the
fourth review of the Ukraine EFF on June___, 2024].
|
|
Coupon on new Vanilla Bonds
|
Subject to the satisfaction of the Exchange Control
Variable and the Exchange Principal Amount being higher than zero
(each as described below) (together, the "Exchange Condition"), the Ukraine
Recovery Instruments will be exchanged into Vanilla Bonds which
will bear interest of the same coupon rate as Vanilla Bonds from
and including the Exchange Date to maturity.
|
|
Exchange Control Variable
|
The Exchange Control Variable shall be met if, when
measured on the Exchange Control Variable Test Date, the average of
the real GDP at constant prices in UAH as reported in the World
Economic Outlook published on or immediately prior to the Exchange
Control Variable Test Date ("GDP") for the fiscal year 2025 and
projected GDP for the fiscal year 2026 is at least equivalent to
85% of GDP for the year 2021.
"Exchange Control
Variable Test Date" means April 30, 2027, provided that
if World Economic Outlook is not published on or before April 30,
2027 the Exchange Control Variable Test Date shall be adjusted to
be the last day in the calendar month of 2027 in which the World
Economic Outlook is published.
|
|
Cash flows associated with Ukraine Recovery
Instruments
|
There will be no payouts under the Ukraine Recovery
Instruments. The Ukraine Recovery Instruments shall only constitute
a security of the Issuer that provides the holder with the right to
receive Vanilla Bonds upon satisfaction of the aforementioned
conditions.
The Ukraine Recovery Instruments will not be
exchanged for Vanilla Bonds, and there will therefore be no cash
flows derived from or associated with the Ukraine Recovery
Instruments, unless Ukraine's economic performance exceeds the IMF
baseline scenario and the Exchange Condition is
satisfied.
|
|
Legal protections
|
Vanilla Bonds will include cross-default provisions
that will be triggered by Ukraine's failure to comply with the
following obligations in relation to the Ukraine Recovery
Instruments (after expiry of grace periods and materiality
standards to be agreed):
- compliance with the Tax
Revenue Reporting Undertaking;
- compliance with the
Exchange Condition Reporting Undertaking;
- delivery of the appropriate
amount of new Vanilla Bonds on the Exchange Date in exchange for
the Ukraine Recovery Instruments, provided that (a) the Exchange
Condition has been met and (b) the Exchange Principal Amount has
not been reduced to zero.
The Ukraine Recovery Instruments will
not have collective action clauses allowing for aggregation with
unsecured debt securities of Ukraine, including the
Vanilla Bonds issued in the proposed debt exchange.
However Vanilla Bonds issued on the Exchange Date will
include collective action clauses allowing for aggregation with all
such other unsecured debt securities of Ukraine.
|
Indicative term sheet -
Option 2
|
Principal Amount
|
Holders will receive US$475 principal amount of
Vanilla Bonds for each US$1,000 in principal amount[6] of Eurobonds exchanged and interest accrued as a
result of the 2022 restructuring amendments to the terms of the
Eurobonds.
Each series of Vanilla Bonds will be issued in an
aggregate face amount sufficient to ensure adequate liquidity and
index eligibility, all of them being benchmark size.
The commercial terms of the Vanilla Bonds are
designed to meet programme debt-related targets under the current
IMF baseline scenario.
|
|
Maturities and Principal
Amortization
|
The Vanilla Bonds will mature in 2034, 2035, 2036,
2038, and 2040, bullet repayment at maturity.
|
|
Coupon
|
Interest shall be payable on each series of
Vanilla Bonds on a semi-annual basis in arrear, on [December 15 and
June 15] of each year until maturity, at the following annual rates
for interest payment dates falling in the specified calendar
year:
H2 2024 -2025:
1.00%
2026-2027:
3.00%
2028 to maturity:
6.00%
Interest will accrue from the issue date of
each series of Vanilla Bonds to the relevant maturity date, and
will first be paid on [December 15], 2024.
|
|
Risk Factor related to the Vanilla
Bonds
|
The Exchange Offer Memorandum will include a specific
risk factor stipulating that:
"The terms of the Vanilla Bonds, including the
principal amount, amortization profile, maturity date, and interest
rate on each series of Vanilla Bonds, have been calibrated to allow
Ukraine to reach the debt sustainability targets set forth in its
Extended Fund Facility with the IMF approved on March 31, 2023
("EFF") under the baseline
macroeconomic framework approved by the IMF Executive Board on
[June ___, 2024 in its fourth review] of the EFF (the "baseline scenario"). The baseline
scenario is subject to significant risks, including those arising
from the exceptionally high uncertainty stemming from the war,
potential policy slippages and delays or shortfalls in external
financing. The IMF Executive Board in its [fourth review] also set
forth a downside macroeconomic framework (the "downside scenario"), as required under
the IMF's policies for lending "under exceptionally high
uncertainty", which takes into account the impact of the
realization of certain of these risks.
In the event that Ukraine underperforms vis-à-vis the
baseline scenario, including but not limited to a circumstance
where the IMF's "downside scenario" materializes, a further debt
restructuring exercise affecting the Vanilla Bonds will likely be
required. Such further treatment of the Vanilla Bonds may include
reductions in principal amount, extension of maturities, and/or
reduction in the interest rate applicable to each series of Vanilla
Bonds, in order to ensure debt sustainability targets in the EFF
are achieved under the then-prevailing macroeconomic conditions and
outlook. There can be no assurance in these circumstances that
Ukraine will be in a position to perform any or all its obligations
under the Vanilla Bonds unless or until such further restructuring
is implemented."
|
|
Language expected to be included in Letter of
Intent to the IMF / IMF Memorandum of Economic And Financial
Policies of Ukraine
|
"Our international partners have assured us of their
continued support to help ensure that debt sustainability is
restored, and the program is fully financed. As part of our efforts
to restore debt sustainability we announced on March 24, 2023, the
intention to undertake a restructuring of our external public debt,
in line with program parameters, and our plan remains to reach
agreement with commercial creditors before the end of August 2024.
Should the case arise where the macroeconomic and debt outlook
worsen, we also commit to undertaking a further external commercial
debt treatment as needed to restore debt sustainability in line
with program parameters".
|
|
[Loss Reinstatement
|
In March 2023, the Group of creditors of Ukraine
("GCU") agreed to provide
an additional official sector debt treatment to contribute to
restore debt sustainability of Ukraine upon the earlier to occur of
(i) the end of the period of Exceptionally High Uncertainty and
(ii) the end of the IMF program in 2027 (the "GCU treatment"). Such additional debt
treatment will be provided prior to any further required treatment
of the Vanilla Bonds.
In the event that application by the GCU of
Comparability of Treatment ("CoT") principles at the time of the GCU
treatment requires that a further treatment of commercial claims be
implemented, then Ukraine has committed to undertake such further
debt treatment of commercial claims (the "further debt treatment"). In this
circumstance, loss reinstatement provisions embedded in the terms
of the Vanilla Bonds shall reinstate the original (pre-2022
restructuring) claim of bondholders plus accrued and unpaid
interest thereon up to the date of the further debt treatment less
the aggregate amount of interest paid on the Vanilla Bonds up to
the date of the further debt treatment, provided that the
loss reinstatement provisions shall only be valid in relation to a
further debt treatment that is confirmed as necessary based on the
GCU treatment and CoT and will expire should no such further debt
treatment be required at that time.]
|
|
No Warrants related Events of
Default
|
The Vanilla Bonds (unlike certain series of the
Eurobonds) will have no events of default related to or referencing
the Warrants.
|
|
Most-favoured
creditor clause
|
Ukraine shall not enter into any compromise or
agreement in respect of commercial debt claims (including the
sovereign guaranteed commercial debt of Ukravtodor and Ukrenergo)
that would provide to holders of such claims a material
difference in recovery value (to be defined) than that received by
holders of Eurobonds participating in the proposed debt exchange
without offering substantially similar terms (or other
consideration of equivalent value) on a rateable basis to all
holders of Vanilla Bonds issued in the proposed Debt Exchange.
|
|
[Ad Hoc Creditor Committee adviser's
fees
|
The exchange documentation will provide a mechanism
for payment or reimbursement of all reasonable fees, costs and
expenses (including legal and financial adviser fees) of the Ad Hoc
Creditor Committee on mutually satisfactory terms and in line
with the market standard by way of deduction of such fees from the
first coupon payment on the Vanilla Bonds or otherwise.]
|
Annex B (con't)
Summary of Sovereign
Proposal
Annex C
Committee Proposal
Annex D
Adjusted Committee Proposal
***
This press release does not constitute an offer of the new
securities for sale in the United States, and the new securities
(if issued) will not be registered under the U.S. Securities Act of
1933, as amended (the "Securities
Act") or the securities laws of any state of the United
States and they may not be offered or sold within the United
States, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act
and applicable state or local securities laws. This press release
does not constitute an offer of the new securities for sale, or the
solicitation of an offer to buy any securities, in any state or
other jurisdiction in which any offer, solicitation or sale (if
made) would be unlawful. Any person considering making an
investment decision relating to any securities must inform itself
independently based solely on an offering memorandum to be provided
to eligible investors in the future in connection with any such
securities before taking any such investment
decision.
This announcement is directed only to beneficial owners of the
Eurobonds who are (A) "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act or (B) outside the
United States in offshore transactions in compliance with
Regulation S under the Securities Act, that may lawfully
participate in the Transaction in compliance with applicable laws
of applicable jurisdictions.
No
offer of any kind is being made to any beneficial owner of
Eurobonds who does not meet the above criteria or any other
beneficial owner located in a jurisdiction where the offer would
not be permitted by law.
Forward-Looking
Statements
All statements in this press release, other than statements of
historical fact, are forward-looking statements. These statements
are based on expectations and assumptions on the date of this press
release and are subject to numerous risks and uncertainties which
could cause actual results to differ materially from those
described in the forward-looking statements. Risks and
uncertainties include, but are not limited to, market conditions
and factors over which Ukraine has no control. Ukraine assumes no
obligation to update these forward-looking statements and does not
intend to do so, unless otherwise required by
law.
Notice to
Investors in the European Economic Area and the United
Kingdom
Notice to EEA
retail investors. The announcement contained
in this press release is not being directed to any retail investors
in the European Economic Area ("EEA") or in the United Kingdom.
As a result, no "offer" of new securities is being made to retail
investors in the EEA or in the United Kingdom.
This announcement is only directed to beneficial owners of
Eurobonds who are (i) within a Member State of the European
Economic Area if they are "qualified investors" as defined in
Regulation (EU) 2017/1129 and (ii) within the United Kingdom they
are "qualified investors" as defined in Regulation (EU) 2017/1129
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended ("EUWA").
The new securities are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the EEA. For
these purposes, a "retail investor" means a person who is one (or
more) of: (i) a retail client as defined in point (11) of Article
4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within
the meaning of Directive (EU) 2016/97 (as amended), where that
customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II.
The new securities are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the United
Kingdom. For these purposes, a "retail investor" means a person who
is one (or more) of: (i) a retail client as defined
in point (8) of Article 2 of Regulation (EU) No 2017/565 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended; and/or (ii) a customer within
the meaning of the provisions of the Financial Services and Markets
Act 2000 (the "FSMA") and
any rules or regulations made under the FSMA to implement Directive
(EU) 2016/97, where that customer would not qualify as a
professional client, as defined in point (8) of Article 2(1) of
Regulation (EU) No 600/2014 as it forms part of UK domestic law by
virtue of the EUWA.
Consequently no key information document required by
Regulation (EU) No 1286/2014 (as amended, the "EU PRIIPs Regulation") or by Regulation
(EU) No 1286/2014 as it forms part of UK domestic law by virtue of
the EUWA (as amended, the "UK
PRIIPS Regulation") for offering or selling the new
securities or otherwise making them available to retail investors
in the EEA or the United Kingdom has been prepared and therefore
offering or selling the new securities or otherwise making them
available to any retail investor in the EEA or the United Kingdom
may be unlawful under the EU PRIIPs Regulation and the UK PRIIPs
Regulation.
United
Kingdom
For the purposes of section 21 of the Financial Services and
Markets Act 2000, to the extent that this announcement constitutes
an invitation or inducement to engage in investment activity, such
communication falls within Article 34 of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the
"Financial Promotion
Order"), being a non-real time communication communicated by
and relating only to controlled investments issued, or to be
issued, by Ukraine.
Other than with respect to distributions by Ukraine, this
announcement is for distribution only to persons who (i) are
outside the United Kingdom, (ii) have professional experience in
matters relating to investments falling within Article 19(5) of the
Financial Promotion Order, (iii) are persons falling within Article
49(2)(a) to (d) ("high net worth companies, unincorporated
associations etc.") of the Financial Promotion Order, or (iv) are
persons to whom an invitation or inducement to engage in investment
activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000) in connection with the issue or sale
of any securities may otherwise lawfully be communicated or caused
to be communicated (all such persons together being referred to as
"relevant persons"). This
announcement is directed only at relevant persons and must not be
acted on or relied on by persons who are not relevant persons. Any
investment or investment activity to which the announcement relates
is available only to relevant persons and will be engaged in only
with relevant persons.