What went wrong with the restructuring of Ukraine's debt

In the coming days, the restructuring of Ukraine's external debt, including Eurobonds, is due to be completed, and despite the fact that the terms were agreed by the creditors' committee and the Ministry of Finance, an unexpected problem has arisen that affects the Ukrainian holders of these bonds.

Despite the fact that the restructuring seemed predictable and prepared, a situation appeared that could seriously affect small Ukrainian investors. It turned out that to participate in the vote on the restructuring of Eurobonds, it is necessary to have a minimum lot, which for this market is $100 thousand or $200 thousand, depending on the issue. Many Ukrainian investors own bonds in volumes smaller than this minimum, and therefore cannot vote.

This problem arose due to the fact that before the start of a full-scale war with Russia, many Ukrainians purchased Eurobonds in small volumes, which became possible thanks to the policy of the National Bank of Ukraine. However, due to the aggression of Russia and the fall of the market, the situation has changed, and now Ukrainian investors are facing problems that they could not foresee.

The terms of the bond restructuring, including the minimum voting lot requirements, were not taken into account when preparing the restructuring. As a result, small investors, who may be a large part of the market but whose holdings of Eurobonds are relatively small, cannot participate in the important voting process.

This may lead to increased debt write-offs for those who were unable to vote, and create additional difficulties for the Ministry of Finance and the National Bank of Ukraine. Although this will probably not have major consequences for the restructuring itself, for small investors the situation can be quite difficult.

A possible solution could be voting at the level of the National Bank of Ukraine, which could vote for all Ukrainians together. However, it is not yet known whether the regulator will agree to such a proposal. This situation is another reminder that investments in Ukraine can be unpredictable, and even international norms and rules do not always guarantee fairness for all market participants.

Apart from this problem, domestic and foreign markets remain quite stable. More warrants were traded on the foreign market, the hryvnia shows moderate fluctuations, and rates on the domestic market remain stable. Inflation in Ukraine continues to rise, reaching 5.4%, and this may have further consequences for the economy.

Data on the consumer sentiment of Ukrainians, which improved in July, even despite the blackout, are somewhat surprising. Perhaps the improvement in mood is connected with the recent events in Kursk, which could also have a positive effect on the perception of the situation in Ukraine.

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