Ukraine Debt Vote Gets Boost as Rebel Bondholders Approve Deal

  • Raiffeisen says debt restructuring is now 'done deal'
  • Holders who sought better offer satisfied with new terms

A group of investors who asked last month for better terms in Ukraine’s $18 billion debt restructuring said they approve of recent changes and will vote in favor of the deal at a bondholder meeting next week.

The group, which holds more than 25 percent of a $500 million Eurobond that matured last month, said it’s satisfied with Ukraine’s offer to swap the note into a new security that will be redeemed in 2019, according to an e-mailed statement from a law firm representing the group. Investors in a bond maturing Oct. 13 will receive similar terms, while other bondholders are being offered a share of a series of nine new bonds.

The group’s endorsement removes one of the last obstacles to Ukraine’s debt restructuring as new terms agreed after five months of negotiations are put to the vote on Oct. 14. The eastern-European nation’s bonds have rallied more than 20 cents on the dollar since a Franklin Templeton-led creditor group, which holds about half of the government’s notes, approved the terms in August. The deal has since been endorsed by money managers including from Pioneer Investments and Aberdeen Asset Management Plc.

"It’s a done deal," said Gintaras Shlizhyus, a Vienna-based strategist at Raiffeisen Bank International AG. "The agreement on the shorter maturities has substantially decreased the possibility of holdouts."

Passing the deal without holdouts will help the war-ravaged country meet its obligations under a $17.5 billion International Monetary Fund loan that requires a reduction to its external debt burden. The terms include a 20 percent writedown to the principal value of the bonds, higher average interest payments and warrants tied to gross domestic product growth.

For the bonds to be restructured, 75 percent of the investors need to vote in favor at next week’s meeting in which two thirds of the creditors are represented. If quorum isn’t met at a first meeting, a second meeting can be called after two weeks.

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