Ukraine's chief debt negotiator told investors in London this week that Kyiv is in no hurry to restructure its GDP-linked debt, three sources told Reuters, effectively preparing them for possible default on a payment due within weeks.
The meetings in London between investors and Ukraine's debt chief, Yuriy Butsa, came as senior Russian and Ukrainian negotiators met in Turkey for the first direct talks over the ongoing war more than three years.
Ukraine owes just over half a billion to warrantholders in June. While it restructured its international bond debt last year, a chasm remains between it and holders of its $3.2 billion worth of warrants after talks with a committee of holders broke down without a deal last month.
Butsa told investors this week that Ukraine would take its time to get the right deal rather than rushing to strike an agreement before the deadline.
"They've made it clear there is a moratorium in place and ... there is no cross default to the bonds," one investor told Reuters.
The sources said Butsa underlined that a near-term solution to rework the warrants is a priority, but that they were not afraid to miss the payment.
The message is in line with what Kyiv has told the market for weeks, after restricted talks with a committee representing a group of warrantholders broke down without a deal last month.
Still, Ukraine's bonds and warrants traded higher on Friday on the back of optimism around the talks in Istanbul. The warrant was trading half a cent higher to bid at just under 75 cents on the dollar.
The warrants, designed as a sweetener to investors during a previous debt restructuring in 2015, are designed to pay out when Ukraine's economic growth rate exceeds certain thresholds.
Ukrainian officials have said the near-30% collapse in its economy after Russia's 2022 invasion has made the current GDP rebound look unfairly like ultra-strong economy performance.
The warrantholder committee, which sources said is led by prominent hedge funds, said a full restructuring of the warrants was "neither appropriate nor necessary."
