Thursday, August 27, 2015

Ukraine and the Ad Hoc Creditors' Committee agree on Indicative Heads of Terms for restructuring of sovereign and sovereign guaranteed Eurobonds

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA.

Kyiv / London, 27 August 2015: Ukraine and the Ad Hoc Creditors' Committee ("AHC"), which comprises Franklin Advisers, Inc., BTG Pactual Europe LLP, TCW Investment Management Company and T. Rowe Price Associates, Inc., have agreed on Indicative Heads of Terms ("IHT") for the restructuring of 14 sovereign and sovereign-guaranteed Eurobonds for an outstanding principal of c. US$ 18 bn. This perimeter includes all eleven outstanding sovereign Eurobonds of Ukraine and three sovereign guaranteed Eurobonds of FinInPro.

Both Ukraine and the AHC are pleased that a consensus on the best way forward for Ukraine has been found and look forward to working together to ensure the rapid implementation of the deal.

This agreement will allow Ukraine to fulfil, thanks to the collaboration of its most significant creditors, a key element of the implementation of the IMF-supported Extended Fund Facility (“EFF”) agreed in March 2015.

The main features of the IHT include:


·                     A 20% nominal haircut, yielding up to US$3.6 bn of debt relief for Ukraine on bonds within the perimeter of the IHT. This debt relief could reach up to US$3.8 bnonce the City of Kyiv Eurobonds and sovereign-guaranteed international loans, which are outside of the scope of the IHT, are restructured as well;

·                     Eurobonds within the IHT perimeter to be rolled into nine new bonds, with principal payments rescheduled to fall outside of the EFF program period (2015-2018). Principal is instead repaid thereafter in nine equal amounts from 2019 to 2027;

·                     A coupon of 7.75% on all nine series, representing an increase of c.50 basis points (0.50%) compared to the blended average under current contractual agreements;

·                     A value recovery instrument in the form of a real GDP growth warrant, providing potential upside to holders from 2021 to 2040 under the following terms (exact definitions and formulas can be found in the IHT):

o        No payments if real GDP growth is below 3%;
o        15% of the value of the GDP growth between 3-4%;
o        40% of the value of the GDP growth above 4%;
o        payments for years 2021 – 2025 capped at 1% of GDP for each year, and
o        no payments unless nominal GDP is higher than US$125.4 bn.

The full content of the IHT and certain other information can be found on the website of the Ministry of Finance (www.minfin.gov.ua). The terms of the IHT are non-binding and are subject to appropriate legal documentation. The Ukrainian authorities have agreed to procure necessary implementing legislation before exchange offers are launched in the market. The AHC holds approximately half of the Notes under consideration and will, together with Ukrainian authorities, actively promote the exchanges that will be part of the implementation of the IHT. The EFF anticipates that Ukraine will re-enter the capital markets in 2017.

Natalie Jaresko, Minister of Finance said:
"This agreement is a very important milestone for Ukraine. It is the outcome of negotiations that were difficult but conducted in good faith. Ukraine gets a very immediate and very significant debt reduction worth up to US$3.6 bn while maintaining its status in capital markets, a significant plus for our economy and our banking system. We get some US$11.5 bn financing for our IMF-supported Program, giving us the necessary financial breathing space. Importantly, we align our interests with our creditors. I call on all bondholders to support this operation."

Igor Hordiyevych of BTG Pactual, Michael Hasenstab of Franklin Advisers, Penny Foley of TCW and Mike Conelius of T Rowe Price, representing the AHC, said:
“As long-term investors in Ukraine, we are pleased that terms have been agreed that will allow Ukraine to maintain its access to capital markets and provide the stable economic platform that will help the country to restore growth.

“This agreement is confirmation of the private sector’s confidence and belief in Ukraine and our willingness to invest in its future recovery. The Committee echoes the Minister’s call for bondholders to support the deal and urges the official sector to follow its lead by providing Ukraine with non-debt support in the form of grants.”

Ukraine is advised by Lazard as financial adviser and global coordinator and White & Case LLP as international legal counsel. The AHC is advised by The Blackstone Group International Partners LLP as financial adviser and Weil Gotshal & Manges as international legal counsel.

-ENDS-

All enquiries to:
Ministry of Finance of Ukraine
Darina Marchak, Press Secretary, Ministry of Finance of Ukraine
darina.marchak@gmail.com / +38 0672 392 005
Graham Ackerman, APCO Worldwide for the Ministry of Finance
gackerman@apcoworldwide.com / +44 7818 542 377

Ad Hoc Creditors’ Committee

Greenbrook Communications

Andrew Honnor / Alex Jones / Matthew Goodman

+44 20 7952 2000

This announcement is not for release, publication or distribution, directly or indirectly, in or into the United States of America.  The materials contained in this announcement do not constitute, or form a part of, any offer of or solicitation to purchase securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or under any securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There is no intention to conduct a public offering of securities in the United States of America.

The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction.


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