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Ukraine repurchases 10% of 2022 Eurobonds and brings redemption of GDP warrants to 20%

05.02.2022

The Ministry of Finance of Ukraine recently repurchased about 10% of Eurobonds maturing in September 2022, as a result of which their circulation fell to $ 912 million, the agency said on Friday.

 

"The Ministry of Finance of Ukraine has conducted several repurchase operations of GDP warrants, as a result of which, as of February 4, 2022, the Ministry of Finance owns about 20% of the total nominal amount of securities," the document reads.

 

In it, the Ministry of Finance emphasizes that such operations on active management of public debt in favorable market conditions are provided by the Medium-Term Strategy of Ukraine's Public Debt Management for 2021-2024 and aimed at smoothing the debt service profile and reducing the peak burden on the state budget. Funds for the purchase of GDP warrants are also provided in the state budget, the agency added.

 

"The Ministry of Finance does not currently intend to resell GDP-linked securities," the statement said.

 

Earlier it was noted that in the face of the threat of Ukraine from Russia and the resulting sale of Ukrainian assets, the value of Eurobonds in 2022 fell below 90% of face value on some days, and their yield to maturity jumped to 26.5% per annum.

 

The price of GDP warrants in January fell to 66.7% of face value compared to 90.7% -95.3% in December and more than 100% in almost all other months of last year. However, some stabilization of the situation and, possibly, active operations of the Ministry of Finance, led to the recovery of their price to 76.7%, and Eurobonds-2022 - to 97.1%.

 

According to a report by the State Treasury, in December the Ministry of Finance spent about $ 170 million on GDP warrants, which, taking into account their prices at the time, estimated their purchase at about 5.7% of their total.

 

In August 2020, the Ministry of Finance announced the redemption of about 10% of GDP warrants, when the securities were quoted about 86% of face value.

 

In the same year, the Ministry of Finance conducted an active operation with external public debt, issuing new Eurobonds maturing in 2033 at the end of July in the amount of $ 2 billion at 7.253%, and buying and exchanging Eurobonds with an interest rate of 7.75% and maturing in 2021. and 2022 in the amount of $ 435.14 million and $ 370.34 million, respectively.

 

In the 2022 state budget, expenditures on GDP warrants amount to about UAH 1.4 billion, or about $ 50 million.

 

GDP warrants were issued as part of Ukraine's public debt restructuring in 2015 instead of Eurobonds with a nominal value of about $ 3 billion 239.32 million (20% of the restructuring volume) and are not part of the country's public debt. Payments for GDP warrants are made annually in cash in US dollars, depending on the dynamics of Ukraine's real GDP growth in 2019-2038, but after two calendar years - ie between 2021 and 2040.

 

If GDP growth for the year is below 3% or real GDP is less than $ 125.4 billion, there will be no payments on paper. If the growth of real GDP is from 3% to 4%, the payment on securities will be 15% of the excess of GDP over 3%, and if above 4% - then another 40% excess of GDP over 4%. In addition, from 2021 to 2025, payments are limited to 1% of GDP. The lack of any post-employment payment restrictions after 2025 has been criticized by some domestic politicians and experts.

 

Taking into account the quotations in December and the volume of expenditures, the volume of new redemption of GDP warrants can be roughly estimated at approximately 5.7% of their total volume.

 

In 2020, Ukraine's GDP fell by 4%, so this year there will be no payments for them. Experts estimate the growth of Ukraine's GDP in 2021 at 3.2-3.3%, which corresponds to payments of UAH 1.3-2.4 billion in 2023 (UAH 1.04-1.92 billion, including securities purchased by the Ministry of Finance).

 

Following: interfax.com.ua