Ukraine will miss a $665M GDP warrant payment due on June 2nd.

Kyiv has not reached an agreement with its creditors and will fail to make a $665.5M state debt payment related to GDP warrants, which are debt obligations tied to economic growth rates. Ukraine was supposed to pay this amount to creditors on June 2. However, the Ministry of Finance issued a statement confirming a moratorium on these payments. This moratorium was introduced last year and will stay in effect until the restructuring of this debt is completed. Kyiv reached an agreement with investors last year stating that a potential default on GDP warrants would not affect obligations under regular international bonds.

The issue with GDP warrants is that they were not included in last year’s agreement to restructure Ukraine’s $20B debt. In April, the Cabinet of Ministers negotiated with the warrant holders and proposed exchanging them for sovereign bonds. However, investors were only willing to restructure the May payment, demanding over $400M in cash and the conversion of more than $200M into new bonds. However, Ukrainian officials did not agree to those terms.