We all live in a country and hopefully it is peaceful and stable to support your hopes and dreams. That sounds like a soundbite but in reality, there are many countries which it is not true. The most glaring examples are the ones at war or on the verge of war on a continual basis. How does the government function? A real good example is Ukraine.

In an article by Marc Jones and Karin Strohecker of Reuters, when Russia invaded Ukraine all of a sudden from a financial point of view everything changed overnight.

Just a few months after Russia invaded Ukraine, the country’s financial advisor Rothschild & Co handed Kyiv’s debt chief a thick black folder detailing major sovereign debt restructurings for the past 30 years.

In August 2022, Ukraine agreed with creditors to pause payments on bonds. In September 2024, they restructured their bonds of more than $20 billion in debt which will save the country $11.4 billion over the next 3 years. This is important both in terms of the continuing war effort and its International Monetary Fund program.

Initial negotiations between the government and its lenders did not go to plan. The committee of bondholders complained the write down Ukraine was demanding was in excess of the 20% most had expected and risked doing substantial damage to relations.

In August, representatives of some of the world’s top asset management firms and their legal and financial advisors met in the Paris offices of Rothschild & Co. Ukraine long term legal advisors White & Case were there to.

Members of the key bondholders group, representing asset managers such as BlackRock and Amundi explained their demands, that Ukraine start coupon payments repayments, offer a path towards higher principal recovery and keep it simple.

The International Monetary Fund or IMF was represented and their job was to run the numbers.

The solutions was Ukraine offered a GDP-linked bond and creditors were offered the instant coupon payments they wanted starting at 1.75% and rising to 7.75%.

The deal is structured for the bonds to eligible for main bond indexes, therefore easier to buy and sell.

Bondholders approved the result with a 97% support. The bondholders could either stay a few days to watch the Olympics or leave the city.

Linking to dividend paying stocks, in the bond market, stability is the desirable outcome. Payments come and the bond eventually paid off. The same idea falls with dividend paying stocks, if profits are made on a consistent basis, dividends can be paid and all is good. Hoping for stability in all your investments.

There are more questions than answers, till the next time – to raising questions.