Ukraine’s Official Creditors Expected to Oppose Warrantholders’ C Bond Demands on CoT Grounds; Warrants Rise to 89 Despite Significant Disagreements

The restructuring offer pitched by Ukraine’s warrantholders will not be acceptable to the official sector creditors due to serious comparability of treatment, CoT, issues, sources close told Octus. The ad hoc committee of warrantholders is asking for an exchange at 140% of par into new C bonds with enhanced restructuring protection mechanisms.

Meanwhile, Ukraine’s bilateral official creditors, governments from most of the Western democracies, have granted a standstill until 2027 on their existing debt and continued to provide billions of euros and dollars in budget and military support to Kyiv. Ukraine’s bondholders also accepted a 37% haircut on their claims in 2024.

Sources noted that due to the highly dynamic situation in Ukraine, the Ministry of Finance’s proposal to the warrantholders may not be a firm floor for future negotiations and could evolve, especially if extended into the 2026 budget where cash requirements may face additional constraints under the new IMF program.

The GDP-linked instrument, which is in default, has risen 4 points to 88/89 since Ukraine issued a cleansing statement on Nov. 6, saying the parties had failed to agree on a restructuring plan.

The investors in the ad hoc committee, which hold a blocking stake in the instrument and are advised by PJT Partners and Cleary Gottlieb, are demanding strong protections from a potential future debt restructuring. The group has proposed a claim reinstatement mechanism, or CRM, that would increase the amount outstanding and payable under the C bonds if Ukraine defaults again or restructures its commercial debt. In such a case, Ukraine would have to reinstate the original notional amount at issuance back in November 2015 ($3.239 billion) plus 7.75% of interest, compounded semi-annually, which according to Octus’ calculation would amount to an accrual amount of $7.475 billion if the CRM is triggered in 2026, 11 years after issuance.

Under their plan, the investors’ new C bonds will not be bound by cross-series aggregation in relation to Ukraine’s existing A and B eurobonds. They also demand that the 75% single series consent threshold, found in the warrants, is maintained. These features would make the C bonds harder for Ukraine to restructure.

Ukraine, which is advised by White & Case and Rothschild, has proposed that the Ministry of Finance should be able to aggregate the C bonds with Ukraine’s A and B bonds for voting purposes. This means a sufficient majority in the A and B bonds, which are larger in size, would be able to drag C bondholders into a new agreement without the consent of C noteholders. Ukraine noted in its last proposal that “Voting thresholds above which multiple series two limb extraordinary resolutions affecting Ukraine’s A, B and C bonds would be binding on holders of C Bonds are currently being discussed with Ukraine’s official sector stakeholders.”

In addition to stronger protections in the case of a third restructuring, the C bonds would also benefit from higher coupons than the A and B bonds and shorter maturities (Jan. 30, 2029, Jan. 30, 2030 and Jan. 30, 2031).
 

Ukraine’s eurobonds A and B have step-up coupons as described below. The As mature in 2029, 2034, 2035 and 2036, while the Bs are due for repayment in 2030, 2034, 2035 and 2036.

Bond A coupons will step up as follows:
 

• 1.75% until Aug. 1, 2025;
   
• 4.5% until Feb. 1, 2027;
   
• 6% until Aug. 1, 2033; and
   
• 7.75% until maturity.
   

Bond B coupons will rise as follows:
 

• 0% until Feb. 1, 2027;
   
• 3% until Aug. 1, 2033; and
   
• 7.75% until maturity.
   

Earlier today, the Ministry of Finance said that Ukraine received €5.9 billion from the EU in direct budgetary support. The figure includes €4.1 billion as the EU’s contribution under the G7 Extraordinary Revenue Acceleration, or ERA, for Ukraine initiative and €1.8 billion as a loan under the EU’s Ukraine Facility.

The transfer marks the final tranche of the €18.1 billion mobilized by the EU for Ukraine under the ERA loan. Under the Ukraine Facility instrument, more than €24.4 billion has been transferred to the state budget since 2024 and more than €8.3 billion in 2025.

The ministry said that in order to receive the next regular tranche from the EU, Ukraine has implemented nine reform steps required for the fifth tranche, as well as one outstanding step from the fourth tranche. These cover anti-corruption, public administration, regional policy, human capital, agri-food sector, digital transformation, environmental protection and state asset management.

Last night, Ukraine’s Minister of Justice German Galushchenko and Minister of Energy Svitlana Hrynchuk resigned amid a large-scale investigation into corruption at Energoatom, Ukraine’s nuclear power company. President Zelensky commented on X yesterday, Nov. 12, on Operation Midas, saying, “There must be maximum integrity in the energy sector, in absolutely all processes. I support – and the Prime Minister supports – every investigation carried out by law enforcement and anti-corruption officials. This is an absolutely clear and consistent position for everyone.”

President Zelensky tried but failed to restrict the powers of the National Anti-Corruption Bureau of Ukraine in July after substantial political pressure from international partners including the IMF.