How protective are Ukraine’s international bonds?

This note contains a brief commentary on some of the main legal terms in international debt issues of or guaranteed by Ukraine. The objective is to analyse the degree to which these bonds are consistent with practice in the international capital markets and to weigh up the balance between the sovereign debtor and the bondholder creditors in terms of the rights and protections granted by the terms of the bonds.

Allen & Overy’s main conclusion is that the bond issue legal terms seek to enhance stability for both Ukraine and the bondholders if there is a crisis.

This commentary is based on the terms set out in an issue by Ukraine of $1bn (£600bn) 7.95 per cent notes due 2014 covered by a prospectus dated 30 August 2012. The law firm has, so far, looked at another 14 or so prospectuses covering international bonds, all governed by English law, and the relevant terms discussed in this note seem to be the same or very similar. Nearly all are for US dollars…

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