Ukraine issues USD 462 mln in new securities to exchange for Kyiv bonds

Ukraine’s Cabinet of Ministers ruled on Dec. 18 to exchange all the Kyiv city Eurobonds (CITKIE) maturing in July 2016 (USD 300 mln outstanding) and 60% of Kyiv Eurobonds maturing in November 2015 into a set of government securities. For this purpose, the government ruled to issue USD 175.5 mln in sovereign 7.75% Eurobonds (UKRAIN) maturing on Sept. 1, 2019, USD 175.5 mln in in sovereign 7.75% Eurobonds maturing on Sept. 1, 2020 and USD 111.4 mln in Ukraine’s GDP warrants. As a result of the issue, the total amount outstanding Ukrainian government securities increased: by 15% to USD 1.330 bln for Ukraine’19, by 11% to USD 1.706 bln for Ukraine’20, and by 3.8% to USD 3.028 bln for GDP warrants.

Following the exchange, all of the CITKIE’16 USD 300 mln notes will be exchanged into USD 233.7 mln in government bonds (50/50 maturing in 2019 and 2020) and USD 74.3 mln in Ukraine’s GDP warrants. Each holder in the bond that supported the exchange will receive USD 38.9 in Ukraine’19 bonds, USD 38.9 in Ukraine’20 bonds and USD 25 in GDP warrants for USD 100 in par value of the Kyiv’16 bond. Those who did not vote for the exchange will receive the same quantity of government bonds but only USD 23 in GDP warrants for USD 100 in the Kyiv’16 bond.

59.5% of CITKIE’15 Eurobonds, or USD 148.8 mln outstanding, will be exchanged into USD 117.4 mln in government bonds (50/50 maturing in 2019 and 2020) and USD 36.9 mln in Ukraine’s GDP warrants. Each holder in the bond that sent its exchange instruction will receive USD 39.5 in Ukraine’19 bonds, USD 39.5 in Ukraine’20 bonds and USD 25 in GDP warrants for USD 100 in par value of the Kyiv’15 bond. Those who did not send their exchange instructions will remain the holders of Kyiv’15 Eurobonds.

Alexander Paraschiy: As the city earlier reported, in the first coupon period (until Mar. 1, 2016), the government Eurobonds that were issued in exchange for Kyiv bonds will have a different coupon than the original UKRAIN’19 and UKRAIN’20 Eurobonds. For the original bonds, the coupon period started on Sept. 1, 2015, while for those that came from the exchange of the city’s bonds, the coupon period starts on Nov. 1, 2015. After that, there will be no difference between the original bonds (issued in exchange for old government bonds) and those issued in exchange for Kyiv city’s paper.

Thus far, there is no updated information on how the problem of holdouts owning USD 101 mln in CITKIE’15 notes will be resolved.