Kyiv city to exchange 60% of its USD 250 mln Eurobonds into gov’t paper

As much as 59.5% of the holders of Kyiv city’s USD 250 mln Eurobonds (CITKIE), whose maturity expired on Nov. 6, agreed to exchange them into a set of securities issued by the Ukrainian government, the city reported on Dec. 16. This was a minor change compared to the 57.1% that submitted their exchange instructions as of the initial deadline on Dec. 8. The city is no longer extending the deadline, confirming that the settlement date for the bond exchange will be close to Dec. 22.

As the city earlier reported, it will only exchange its Eurobonds into Ukrainian Eurobonds and GDP warrants with those having submitted participation instructions. Among the holdouts of the USD 250 mln bond’s exchange offer is London-based Franklin Templeton Investment Management, which holds about 32% of the CITKIE’15 Eurobond, according to a Bloomberg report.    

Alexander Paraschiy: Based on the earlier offered exchange conditions, a holder of each USD 100 in CITKIE’15 notes will receive about USD 39.5 in Ukraine’s 2019 notes, USD 39.5 in Ukraine’s 2020 notes and USD 25 in Ukraine’s GDP warrants.

There is much less clarity on what will happen with the holdouts, who own USD 101 mln in CITKIE’15 bonds. As the city and MinFin earlier stated, the opportunity to issue new government Eurobonds (in exchange for the city bonds) is not earmarked in Ukraine’s 2016 draft budget, which means the holdouts may have to negotiate on completely different exchange/restructuring conditions. But the opportunity to get some similar exchange conditions is still possible as nothing prevents the Finance Ministry from amending the 2016 budget draft, whose approval date isn’t clear.