(Bloomberg) -- Ukraine’s GDP warrants rallied to the highest since early 2022 after the government promised to make some of its debt payments.
The warrants, a kind of debt security with payouts linked to economic growth, rose by about 9 cents this week to trade at 58 cents on the dollar on Tuesday, the highest level since Russia started its full-scale invasion of Ukraine.
The notes have rallied alongside Ukraine’s other debt after the government reached a preliminary agreement with some of its private creditors to restructure more than $20 billion of international bonds, a move that will help the country finance its defense efforts. When announcing the deal, the government also said it intended to restructure $2.6 billion in outstanding warrants and make some payments on them.
“Ukraine will commit to ensure the fair and equitable treatment of holders of the warrants in any prospective future liability management or other treatment proposal,” the finance ministry in Kyiv said in a statement on Monday. Ukraine intends to pay a consent fee on Aug. 1 and a deferred 2021 payment on the notes, it added.
The government and a group of bondholders also agreed on removing a cross-default clause between its international bonds and the warrants, meaning that a default of one instrument wouldn’t impact the other. The warrants, due in 2041, traded below 20 cents on the dollar in the wake of President Vladimir Putin’s invasion in February 2022.
“We think the government will try to convert warrants into newly issued bonds, but the parameters of such a deal are hard to predict at the moment,” Ukrainian brokerage Dragon Capital said in a report.
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