Published by Global Banking and Finance Review
Posted on December 1, 2025
4 min readLast updated: January 20, 2026
Ukraine proposes a $3.2 billion bond swap to replace GDP warrants, aiming to resolve its sovereign default. The offer requires 75% acceptance.
By Karin Strohecker
LONDON, Dec 1 (Reuters) - Ukraine launched an offer to investors to swap $3.2 billion of complex and costly GDP warrants for international bonds on Monday, the government said, as it attempts to clear a major remaining hurdle in its push to emerge from sovereign default.
Kyiv managed to complete a restructuring of some $20 billion in international bonds last year after defaulting on its external debt in 2022 following Russia's full-scale invasion.
But Ukraine has until now struggled to rework the economic growth-linked instruments that might mean it having to pay out billions of dollars to investors in the coming years.
The offer, which needs to be accepted by holders representing at least 75% of the warrants maturing in 2041, would see the instruments swapped for cash and new bonds, dubbed C Bonds, that will mature between 2030 and 2032, government documents showed.
"The proposal is based on feedback we received from market participants and takes into account comments on economics and structure provided by the Ad Hoc Committee," Ukraine's top debt negotiator Yuriy Butsa said, referring to the group of warrant holders that spearheaded the negotiations.
Meanwhile, the Ad Hoc group said it could potentially back the offer, but added a number of points remained under negotiation.
"The Ad Hoc Group and its advisers have not yet reached full agreement on the Invitation or the terms of the new ‘C Bonds’," the creditor group said in an emailed statement, adding it would publish a further announcement on Thursday.
NEGOTIATIONS ONGOING
The proposed swap would see investors receive $1,340 in the new bonds for every $1,000 they hold in warrants. In addition, they would receive a consent fee and an additional cash payment with those voting in favour by an early deadline of December 12 in line for the biggest top-up, the document showed.
Ukraine had been in formal negotiations with the key group of investors holding the warrants since November 25, after two previous rounds of talks had proved unsuccessful.
The Ukrainian government is under pressure to finalise a deal on the warrants before year-end as it needs to settle in 2025 due to budgetary constraints, a source familiar with the situation told Reuters.
While paying out the cash will be politically awkward given Kyiv's need to buy as many weapons as it can, the hope is it will be seen as justified for retiring instruments the IMF has estimated could end up costing the country as much as $6 billion.
Ukraine's 2025 budget - including any debt payments - is covered, though the outlook beyond looks more challenging. The IMF estimates Ukraine's financing gap at roughly $136.5 billion for 2026-2029.
GROWTH-LINKED PAYMENTS
Ukraine relies heavily on official partners - the Group of Creditors of Ukraine - and multilateral lenders such as the International Monetary Fund to shore up its finances battered by its costly, nearly four-year-old war with Russia.
Ukraine's finance minister Serhii Marchenko said the country valued the constructive engagement with its creditors.
"We are confident that we will secure support for a restructuring that safeguards our country’s fiscal stability and post-war reconstruction," Marchenko said.
Ukraine holds around 20% of its outstanding GDP warrants, which trigger payments if GDP growth exceeds 3% and nominal GDP exceeds $125.4 billion.
Earlier on Monday, the warrants traded at 93.113 cents, their highest level since December 2021, before turning slightly negative on the day, Tradeweb data showed.
(Reporting by Karin Strohecker, Libby George and Marc Jones in London, and Nilutpal Timsina in Bengaluru, Editing by Alexander Smith and Andrea Ricci )
A GDP warrant is a financial instrument that allows investors to receive payments linked to the economic growth of a country, specifically when GDP growth exceeds certain thresholds.
International bonds are debt securities issued by a country or corporation in a currency other than its own, allowing investors from different countries to invest in foreign assets.
A consent fee is a payment made to bondholders as an incentive to agree to changes in the terms of a bond, such as extending the maturity date or modifying interest rates.
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