Ukraine’s Bondholders Approve Crucial $20 Billion Debt Restructuring

By Marc Jones

LONDON – On Wednesday, Ukraine announced that international bondholders had officially approved its plan to restructure over $20 billion in debt as the country continues to navigate its ongoing conflict with Russia.

Kyiv reported that holders of more than 97% of its debt met the required deadline for approval, facilitating the restructuring process. This plan will reduce the face value of Ukraine’s international bonds by more than one-third, aligning with the demands of the International Monetary Fund (IMF), which stated that such a writedown was essential for sustainable debt levels.

Though Ukraine will need the conflict to conclude or at least see a significant reduction in hostilities before it can borrow from international capital markets again, Finance Minister Serhiy Marchenko emphasized that finalizing the restructuring is a "crucial step." He noted that it will help Ukraine maintain the budget stability required to continue financing its defense efforts and will play an important role in restoring long-term economic stability.

This restructuring marks Ukraine’s second such effort in a decade following a Russian invasion, the first having occurred in 2015 after Russia’s annexation of Crimea. This latest restructuring required the support of at least two-thirds of Ukraine’s bondholders and a simple majority across the various bond series involved.

The negotiation process was expedited, taking only four months, replacing a two-year moratorium on bond payments that was granted in the summer of 2022 and is now coming to an end.

Yuriy Butsa, head of Ukraine’s debt agency and a key negotiator, stated that this restructuring was unlike typical cases in other nations. "This has not been driven by any unsustainable economic policies," he explained, attributing it solely to Russian aggression against Ukraine and noting that it was one of the swiftest debt restructurings in history.

The Group of Creditors of Ukraine, which includes bilateral lenders such as Canada, France, Germany, Japan, Britain, and the United States, expressed their approval of the agreement. They stated, "The swift implementation of the exchange demonstrates substantive support for the government and people of Ukraine by providing substantial debt relief."

As part of the restructuring deal, bondholders will accept a 37% write-down on the face value of their bonds, resulting in an $11.4 billion saving for Ukraine over the next three years, coinciding with the current IMF program. In exchange, they will receive new bonds worth 40 cents per dollar of their original claims, with interest payments restarting immediately. The interest will begin at 1.75%, rising to 4.5% in 2026, 6% in 2027, and 7.75% from 2034 onward.

Additionally, bondholders will receive a bond worth 23 cents that will not yield interest until August 2027 but could increase to 35 cents if Ukraine’s economy outperforms IMF targets by at least 3% by 2028. The new bonds are expected to start trading on August 30 once the final restructuring details are finalized.

Despite this debt relief, Ukraine’s finances are anticipated to remain severely strained due to ongoing military efforts and persistent attacks from Russia. The restructuring addresses only the international market bonds, out of a total debt exceeding $140 billion, of which Ukraine owes about $24 billion (around 15%).

Ukrainian officials have indicated that additional funding may be necessary to bridge budget gaps that have widened recently. Kyiv is also looking to restructure another $2.6 billion in GDP warrants in the coming months, and official creditors—such as Western governments and multilateral lenders—are expected to present a relief plan for their loans next year.

As of now, neither the IMF nor a group of core bondholders involved in negotiating the deal has publicly commented on its approval.