GDP-bonds secure Ukraine restructure

Author: Danielle Myles | Published: 30 Nov 2015

GDP-linked warrants issued as part of Ukraine’s $18 billion debt exchange contain unprecedented creditor protections, making them the closest thing possible to having equity in a country.

The instrument, which gives a return based on the issuing country’s economic growth, has featured in other sovereign restructures. But never before has it been the key component of a successful exchange offer.

On November 12, Ukraine completed its restructure of 14 eurobond tranches as a condition of its bailout by the IMF.

A new approach to holdouts, which involved reducing their leverage such that they would always be worse-off, allowed the cash-strapped government to overcome potential problems under its single series collective action clauses (CACs). But Andrew Wilkinson, partner at Weil Gotshal & Manges which advised the ad hoc creditors committee, said the upside instrument is what really got the deal done.

"It was an offer that bondholders were prepared...