Initial debt-restructuring talks between Ukrzaliznytsia and its bondholders have broken down after investors rejected the state railway’s opening proposal, though both sides remain open to further discussions.
Ukrzaliznytsia and Naftogaz’s Eurobonds remain the last state-owned companies whose external debt is not being renegotiated – Ukrenergo successfully concluded negotiations but has not yet swapped its old bonds for new ones.
Ukraine’s state-owned rail operator is seeking to restructure nearly $1.1 billion in bonds, Bloomberg reported.
The failure to restructure its Eurobonds reflects the financial strain that Russia’s four-year invasion has placed on the company’s operations: declining cargo and passenger volumes, spiraling repair costs, and mounting infrastructure damage that has accelerated sharply since early 2025.
Since the start of this year, Russian attacks have damaged 209 locomotives, 239 passenger carriages, and 371 cargo railcars, Bloomberg reported. The railway says intensifying strikes on its infrastructure have both disrupted operations and driven repair spending significantly higher.
Ukrzaliznytsia’s opening proposal envisaged a 20% reduction in the principal owed to bondholders, alongside a “principal adjustment mechanism” that would link repayments to freight volumes on its network. The bonds, currently due in 2026 and 2028, would be extended to 2033 with an amortization schedule and higher coupons over the life of the restructured debt.
The bondholder group, represented by law firm Hogan Lovells, rejected the offer and, according to Ukrzaliznytsia, has yet to submit a counter-proposal. The company said initial discussions have concluded, though it “intends to continue good faith engagement” with investors.
Hogan Lovells, in a statement on behalf of bondholders, said the railway’s proposal “does not represent a viable basis for good-faith engagement between the parties,” but indicated that investors remain open to further talks.
The central dispute is over freight tariffs. Bondholders argue that the financial pressures facing the railway stem not from the war alone, but from government-set tariffs that are too low to sustain viable operations – a regulatory problem, they say, not a justification for creditor losses. The pressures “are primarily attributable to insufficient tariffs set under the Ukrainian regulatory framework,” the bondholder statement says.
Investors have also objected to what they describe as unequal treatment: Ukrzaliznytsia is seeking writedowns from bondholders while not imposing equivalent losses on other creditors of the same seniority.
The railway’s liquidity position is deteriorating. Cash reserves fell to $273 million from $319 million over the course of last year, and the company projects a further decline in 2026 due to negative operating cash flow.