Ukraine Budgets for New $2.4B Loan in 2026 After Restructuring; New Debt Could Be Offered to Warrant Holders; GDP Instrument at 76 Cents

Relevant Documents:
2026 Draft Budget
Supplement 33 (Ukrainian)

Ukraine’s Ministry of Finance has included a $2.39 billion line item in the country’s 2026 draft budget titled “forecast loan as a result of restructuring deals.”

The new figure (109.462 billion hryvnia, which at the implied exchange rate of 45.8 converts to $2.39 billion) appears in a forecast of public and state-guaranteed debt immediately under a line specifying the amount outstanding under Kyiv’s 2029 eurobonds ($1.168 billion) and could signal that the government is planning an exchange of the defaulted GDP warrants for new debt securities with a principal of $2.39 billion, sources told Octus. The supplement details the government’s other eurobond debt in a separate line.

Sources close to the talks said the government and the investors have not reached a restructuring agreement for the warrants.

The GDP instrument was issued as part of Ukraine’s 2015 debt restructuring with $3.239 billion outstanding principal, of which Ukraine has bought back $604.2 million, leaving $2.635 billion free floating. The total amount outstanding under the warrants is $3.3 billion when including the withheld $665.4 million payout for reference year 2023.

Swapping $3.3 billion of warrants and unpaid payments for $2.39 billion of new notes implies an exchange rate of 72 cents of new bonds for every $1 of warrants (or 90.7 cents per $1 of warrants when excluding the withheld 2023 payout from the calculation). Ukraine’s warrants are currently quoted at 76 cents, according to Solve. Earlier this year, the government proposed a restructuring menu for the warrants including an option to exchange at a ratio of 135 cents of new eurobonds for every $1 of warrants.

Ukraine’s Ministry of Finance declined to comment. The government’s restructuring advisor, Rothschild, did not respond to a request for comment. The ad hoc group of warrant holders declined to comment.

The Ministry of Finance’s restructuring proposal in April contained two options for the warrants. Option 1 offered an exchange of the warrants into new Ukrainian sovereign A and B eurobonds at a 1.35x exchange ratio with allocation shown below:
 

Ukraine’s Option 2 allows for the warrants to remain outstanding but heavily modified. Under this plan, the payouts for reference years 2023, 2024, 2025 and 2026 would be canceled completely and the call option would be extended to May 2029. The instrument’s call option price (currently par) would also be tweaked to 85 cents until May 2027, 90 cents until May 2028 and par until May 2029. In exchange, Ukraine would issue 36.6 cents of new A and B eurobonds for every 100 cents of warrant principal held by investors.

Investors in the ad hoc group, which represents a 30% blocking stake in the warrants, turned down the plan, arguing that there is no need to restructure the principal amount outstanding under the warrants.

Instead, the investors proposed that Ukraine pay 75% of the $542 million due, amounting to $406 million, in cash and structure the remaining as a new instrument, so-called C bonds. These new notes would be $209 million of four-year eurobonds due in 2029 paying 7.75% interest, well above Ukraine’s low coupon instruments whose coupon will only step up over time. The C bonds would be exempted from the collective action clauses that apply to Ukraine’s A and B eurobonds and also contain a loss reinstatement clause. Consent fees and other terms are yet to be pinned down for this transaction, which would leave the instrument intact otherwise.