Ad Hoc Creditor Committee concludes consultation period with the Government of Ukraine

USA - English

• USA - English

Coupon

Maturity

USD 912 mln7.75% 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

7.253 %

Mar-35

Vanilla Bonds

•  Principal amount:
  •  Option 1: 40.0¢ of Eurobond Principal + accrued interest
  •  Option 2: 47.5¢ of Eurobond Principal + accrued interest
•  Cash coupon per annum:
  •  H2'24 – 2025: 1.00%
  •  2026 – 2027: 3.00%
  •  2028 onwards: 6.00%

Maturity: five issuances of equal size maturing in 2034, 2035, 2036, 2038 and 2040 with bullet maturity

•  Haircut significantly in excess of market expectation, which is consistent with a 20% haircut
  •  Sovereign Proposal materially exceeds both advisor and market estimates of the nominal debt relief required to restore debt sustainability in line with the 3^rd review DSA and would risk substantial damage to Ukraine's future investor base and core objective of re-accessing capital markets at the earliest opportunity.
•  Sovereign Proposal does not optimise to the 3^rd review DSA; advisors have acknowledged that it would leave the debt/GDP ratio materially inside target in both 2028 and 2033
•  Proposed coupon levels will not create a representative yield curve of new securities to act as a reliable benchmark for future debt issuance.
•  Concessional coupon rates over the program period and beyond need to better reflect the international interest rate environment for real money investors to be willing to hold the securities and willing to provide significant debt relief through nominal debt reduction and duration extension.
•  A Bond A/B structure would enable a higher coupon 'market bond' to serve as a representative benchmark for future issuance, with the post programme period coupon on Bond B subject to a contingent ratchet based on upside triggers.
  •  Bond A (market bond):
    •  Principal: 40¢ of Eurobond Principal + accrued interest
    •  Coupon: 7.75% cash coupon
    •  Maturities: two issuances maturing in 2030 and 2036
  •  Bond B (recovery bond):
    •  Principal: 40¢ of Eurobond Principal + accrued interest
    •  Coupon: post programme period coupon to be subject to contingent ratchet based on upside (e.g. 0.5% in 2024-27, 2.5% in 2028-33, 7.75% in 2034 onwards)
    •  Maturity: three issuances maturing in 2032, 2034 and 2038
  •  Bond A/B structure would deliver the DSA targets as set out in Annex 1
  •  To include contingent reinstatement features (described below)

Ukraine Recovery Instrument ("URI")

•  Principal amount:
  •  Option 1: 35.0¢ of Eurobond Principal + accrued interest
  •  Option 2: n/a
•  Contingent instrument that entitles holders to receive Vanilla Bonds in Jun-27 subject to:
  •  Exchange Condition: real 2025A-2026E GDP is at least 85% of 2021A real GDP levels (in UAH);
  •  Exchanged Principal Amount: calculated as the average outperformance of tax revenues in USD in 2025-26A (relative to the IMF baseline) multiplied by a coefficient of 1.10, and capped at 35¢ of existing outstanding Eurobond principal plus accrued interest

•  The URI is neither debt nor index eligible and would likely be widely viewed as uninvestable
•  Bondholders are being asked to give up a debt claim upfront, with no path to recover 100¢ nominal recovery, in return for a highly complex and contingent instrument
•  URIs represent a significant part of the potential nominal recovery (up to half) and are in principle highly likely to be unacceptable to many market participants as a route to delivering recovery value.
•  Real money investors would likely be amenable to limited contingent recovery features being incorporated into the debt instruments, possibly using a Bond A, Bond B structure.
•  Contingent reinstatement to be embedded in Bond B, subject to satisfaction of Macro Test (to be defined):
  ‒ 20¢ of Eurobond Principal + accrued interest reinstated as additional Bond B maturing 2040
  ‒ Coupon step-up of Recovery Bonds to 7.75%

Risk Factor Language / CoT

•  Identifies the possibility of a further bondholder restructuring in two scenarios: (i) below IMF Baseline (sensitivities related to the IMF fan chart approach); and (ii) IMF Downside
•  GCU prepared to provide a commitment to undertake further treatment if macroeconomic performance is below IMF Baseline through Comparability of Treatment ("CoT")

•  IMF's Baseline scenario to be adjusted for the fourth review
•  Transparency
  •  CoT assessment criteria remain unclear; further clarity required on weighting of criteria and methodology (i.e. NPV change, duration change and debt flow relief during IMF programme period)
  •  Investors will need to understand how CoT will be assessed and will require transparency on this point from the GCU
  •  It must be clear on legal terms that Ukraine will require the GCU to make comparable concessions on a transparent basis before any further restructuring of the Eurobonds is undertaken (if issues remain with debt sustainability)
•  Asymmetric Treatment scenario
  •  There may be a scenario where at the time debt sustainability is tested, it can be achieved by the GCU restructuring on more favourable terms than those agreed between Ukraine and bondholders (i.e. where full comparability of treatment between the GCU and bondholders is not required to achieve debt sustainability)
  •  Treatment of Vanilla Bonds in such circumstances to be discussed

Loss Reinstatement

Loss reinstatement concept included for the earlier of: (i) the end of the period of exceptionally high uncertainty and (ii) the end of the IMF program in 2027

•  Concept of loss reinstatement aligns with market feedback
•  Loss reinstatement must endure for at least the current IMF programme period
•  The reinstated amount should be the pre-2022 restructuring claim of bondholders plus accrued and unpaid interest thereon plus a top-up amount to reflect lost economics during the period of any default adjusted for cash received (calculation to be discussed between advisers)

Other

•  Warrants:
  •  Sovereign Proposal is silent on treatment
  •  Removal of cross-default from Warrants in the Vanilla Bonds

•  Investors are unable to respond in absence of further information or agreement on other elements of any proposed restructure
•  Ukraine to confirm that no events of default will occur during the implementation period or until the call exercise period has expired