By Marc Jones
(Reuters) -Talks between Ukraine and holders of its GDP warrants have broken down for a second time in six months, the Kyiv government said on Thursday, adding another delay to its hopes of restructuring the $3.2 billion worth of bond-like instruments.
“The parties have jointly decided to terminate the restricted discussions without reaching final agreement on the terms of a potential restructuring of the warrants,” the finance ministry said in a statement.
Having failed with an original proposal back in April, this time Kyiv offered warrant holders a simpler plan to convert their warrants into a new traditional-style bond sweetened with an additional cash payment.
It added that it intended to “continue engagement” with the debtholders, and would consider “all available options” to restructure the instruments, which is a stipulation of its IMF programme.
Ukraine threw in the GDP warrants – fixed income securities which only pay out if Ukraine’s economy grows strongly – to sweeten its 2015 debt restructuring following Russia’s annexation of Crimea.
But their complex structure meant they were not part of last year’s broader $20 billion restructuring that became necessary following Moscow’s full-scale invasion in early 2022.
With still no sign of the war ending and the country now hoping to secure a four-year multi-billion dollar extension of its IMF plan by the start of next year, onlookers have asked whether a further debt write-down might be recommended by the fund.
People familiar with the discussions said the latest talks had been dominated by a push from the warrantholder committee, which includes hedge funds VR Capital and Aurelius Capital, for insurance against the risk creditors may eventually asked to take further losses.
Ukrainian Finance Minister Serhii Marchenko called the lack of progress in the discussions over recent weeks “regrettable”.
“Our objective remains clear,” he added. “To secure a solution that supports Ukraine’s macroeconomic stability and recovery, while maintaining our commitments under the IMF programme.”
The warrantholder committee did not immediately comment on the breakdown of the talks.
The warrants themselves fell fractionally following Ukraine’s statement to just under 85 cents per dollar, well above the 41-68 cents levels of the already restructured sovereign bonds.
(Reporting by Marc Jones; editing by Mark Potter, Mark Heinrich and Cynthia Osterman)
