Fixed Income
Ukrainian sovereign Eurobonds enjoyed the highest one-day percentage gains in their history last week after the announcement of a restructuring deal with private creditors. Early-week rumors of a 20% writedown on the principal value of the bonds were subsequently confirmed on Thursday (Aug 27). Among other important terms of the deal, there will be a 4-year maturity extension for each outstanding issue, with the new coupon on all 9 remaining bonds set at 7.75%; this represents a half-percent increase over the previous average sovereign coupon rate of 7.22%. In our view, the so-called instrument of “value recovery” for bondholders, which is linked to Ukraine’s real GDP performance, can be ignored for now, due to the quite optimistic growth parameters needed for the instrument to take effect. Ukraine-2015 sovereigns previously due to be redeemed on Sept 23 jumped 17% to close at 70.8/72.8, and the longest outstanding issue Ukraine-23s surged by 27.5% to 70.3/72.3. We assume that after th
