LONDON (Reuters) - Ukraine issued GDP-linked securities, known as warrants, to creditors who wrote down 20 percent of bonds’ original value as part of a 2015 debt restructuring.
The warrants pay out if Ukraine’s economic growth exceeds certain thresholds.
Here are some facts about the securities:
*The warrants, with a notional face value of $3.6 billion, are structured to pay out depending on economic data for 2019-2038. The first payments can happen in 2021 and the last in 2040. The first reference year for GDP is 2019, potentially triggering payout in 2021.
*Payouts are capped between 2021 and 2025 at 1 percent of nominal overall GDP.
*Payout depends on the following economic variables: Real GDP growth, nominal GDP size, GDP deflator and nominal dollar/hryvnia exchange rate. These variables are taken from the International Monetary Fund’s World Economic Outlook, except for the exchange rate which is based on Ukraine’s central bank data.
*GDP SIZE - The value of Ukraine’s economy must exceed a minimal nominal GDP threshold of $125.4 billion in any given reference year. This is calculated using the average hryvnia/dollar rate.
*GROWTH RATE - If real, or inflation-adjusted GDP growth exceeds 3 percent, Ukraine will pay warrant holders a sum equal to 15 percent of economic output above this threshold. However, if real growth is over 4 percent, the payment rises to 40 percent of national wealth created above the higher level.
*The warrants have a put option if Ukraine fails to meet certain conditions, including non-payment or moratorium on debt. This would allow holders to ask Ukraine to repurchase the securities at their notional price. The put option expires Dec 31 2018.
*The warrants expire May 31 2040
Compiled by Sujata Rao; editing by David Stamp