Holders of Ukraine’s GDP-linked warrants have overwhelmingly approved a restructuring plan that will fully eliminate the controversial instruments, marking a key milestone in Kyiv’s efforts to stabilize public finances during and after the war.
The operation affects GDP warrants with a notional value of about $2.6 billion, which remained outstanding after Ukraine’s 2015 debt restructuring that introduced the instrument following Russia’s annexation of Crimea and the invasion of eastern Ukraine.
Ukraine’s Ministry of Finance announced the news in its press release on Dec. 18.
An overwhelming majority of eligible warrant holders – 99.06% – voted in favor of an Extraordinary Resolution supporting the exchange, well above the 75% threshold needed to trigger a mandatory swap for remaining investors, the finance ministry said in an announcement via Euronext Dublin.
Under the approved terms, Ukraine will convert almost all remaining GDP warrants into a new class of conventional sovereign debt – so-called Step-Up C notes due in 2032 – with a total face value of about $3.5 billion.
A much smaller portion, roughly $34 million, will be exchanged into Step-Up B notes maturing in 2030 and 2034.
Ukraine has also canceled $604 million of GDP warrants repurchased between 2019 and 2021 and held by the state, effectively removing the instrument entirely.
GDP warrant swap cuts Ukraine’s fiscal risks
The finance ministry has long argued that GDP warrants posed a structural risk to public finances, particularly during a post-war rebound.
Issued in the 2015 restructuring, the securities obligated Ukraine to pay if real GDP growth exceeded 3% and nominal GDP topped $125.4 billion, with no payout cap after 2025.
The ministry estimates that total payments under the warrants between 2025 and 2041 could have ranged from $6 billion to $20 billion, depending on the pace of economic recovery.
The risk became more pronounced after Ukraine’s economy rebounded 5.3% in 2023, following a nearly 30% contraction in 2022 caused by Russia’s full-scale invasion.
The rebound triggered a $643 million payment claim under the warrants, despite officials noting no meaningful improvement in living standards or fiscal space. That claim has now been fully settled as part of the restructuring.
Finance Minister Serhiy Marchenko said the deal would save Ukraine “billions of dollars” in potential future payments and improve budget predictability at a critical time.
“We are removing a toxic instrument that posed a serious fiscal threat to Ukraine and could have jeopardized our recovery and reconstruction,” Marchenko was quoted as saying in the press release.
Converting the warrants into standard bonds with aggregation clauses is expected to reduce long-term volatility and pave the way for a return to international capital markets once security conditions improve.
Yuriy Butsa, Ukraine’s commissioner for public debt management, said the transaction addressed one of the key risks identified in the country’s debt management strategy and strengthened Ukraine’s position ahead of post-war reconstruction financing.
Settlement timeline
Following the positive vote, the restructuring process now moves to settlement, which is expected to take place in the coming days and conclude before the end of the year, the finance ministry said.
The successful vote comes after Ukraine announced earlier this month that it had finalized commercial and legal terms with major warrant holders, clearing the last significant hurdle.
With the GDP warrants eliminated, Ukraine has now completed negotiations on the final outstanding portion of its pre-war sovereign debt restructuring.