Kyiv city warns of risk of non-participation in Eurobond exchange

At a webcast on Dec. 1, the representatives of Kyiv city and the Ukrainian government presented their rationale for the offered exchange of the city’s Eurobonds (CITKIE) worth USD 550 mln into a set of sovereign securities. They explained again that an exchange into sovereign bonds is only possible this year as Ukraine’s 2016 budget draft does not foresee such an exchange. They also reminded the public that the city has declared a suspension on any Eurobond payments as such an opportunity had been granted by the Ukrainian parliament. Local courts cannot consider the claims of the holders of the suspended debt, according to the legislation. The city also warned that it has no assets abroad. 

The holders’ deadline for sending exchange participation instructions for CITKIE’16 notes is Dec. 4 and for CITKIE’15 notes is Dec. 8. The bondholder meetings to vote for the exchange will occur on Dec. 8, and in the absence of a quorum (2/3), the adjourned meetings can be scheduled for Dec. 22.

The city is offering to exchange both its Eurobonds for Ukrainian government Eurobonds maturing in September 2019, September 2020 and Ukraine’s GDP warrants in the proportion of 375/375/250. Those who won’t support the exchange (in the event that it’s approved by a 3/4 majority) will receive by 8% less GDP warrants.  The accrued interests on the city’s bonds as of Nov. 1 will be exchanged 50/50 into the 2019 and 2020 government bonds. The government bonds will have a coupon rate of 7.75%. Their first coupon period will start on Dec. 2 and end on Mar. 1, 2016. The next coupon periods will be the same as for the already issued government bonds (UKRAIN) maturing in September 2019 and 2020.

Alexander Paraschiy: The city and the government have drawn broad support from the IMF and international lenders who earlier agreed to restructure USD 15 bln in UKRAIN Eurobonds, so they are very unlikely to offer anything new to CITKIE bondholders this year. We continue to expect that the necessary majority of the city’s bondholders will accept the offered exchange conditions.