Ukraine central bank enhances flexibility in external debt restructuring

Макроэкономика 24.06.2015 The National Bank of Ukraine (NBU) announced on June 23 that it will allow the nation’s residents to pay up to 2% in an additional commission to facilitate the restructuring of their international bonds or the banks’ subordinated debt. This one-time commission can be paid in excess of the effective interest rate limit, but only in case the debt is prolonged by more than two years and is either an internationally listed debt instrument or subordinated debt of a bank. Beforehand, the central bank limited all payments of residents to international creditors under any borrowing to the effective interest rate of 11%. Alexander Paraschiy: The allowed 2% commission, i.e. a consent fee that is usually offered by bond issuers to facilitate restructuring, will increase the flexibility of Eurobond issuers in offering better restructuring conditions. Beforehand, some issuers were limited in doing so due to the high coupon rate of their bonds. For instance, PUMB (PUMBUZ) was not able to offer any consent fee to its bondholders during the restructuring of its 2014 notes as their coupon rate was already at the ceiling level of 11%. The 2018 Eurobonds of ULF (UKRLAN) and Privatbank (PRBANK) have a coupon rate that is very close to the allowed ceiling (10.88%), so under the old rules, they also would have been unable to offer any consent fee. The new regulation, theoretically, should be beneficial for the holders of the existing Eurobonds of Ukrainian corporate issuers who are candidates for restructuring. Now the issuers have much less grounds to decline offering good consent fees.