Ukraine has defaulted on its GDP warrants. Of course, hedge funds are not happy.

On June 3, S&P Global downgraded Ukraine's GDP-linked bond rating from CC to D.

The agency's website says that on June 2, the Ministry of Finance missed a payment of more than $665 million tied to economic growth rates for 2023. The agency did not wait for the 10-day grace period to expire to make the payment and immediately recognized the default.

Quotes from the original statement of Ukraine's Ministry of Finance:

Ukraine reminds holders that the government’s moratorium, approved on 27 August 2024, on payments under the GDP-linked Securities from and after 31 May 2025 until the completion of the restructuring of the GDP-linked Securities remains in place. In this regard, Ukraine remains committed to implementing a comprehensive, fair and equitable restructuring of the GDP-linked Securities to ensure compliance with (i) debt targets set forth in Ukraine’s IMF programme and (ii) the principle of comparability of treatment with Ukraine’s bilateral partners.

Payment on Ukraine’s GDP-linked Securities

Of course, hedge funds that hoped to get their share of the profit from the war-torn country are not happy about this, and are threatening Ukraine with fines. For example, in this statement by the Ad Hoc Group, the holder of a third of Ukraine's GDP warrants:

The Ad Hoc Group is disappointed by Ukraine’s decision to default on the June Payment without meaningfully engaging with Warrantholders. This is particularly regrettable when considered in light of the proposal put to Ukraine by the Ad Hoc Group during restricted discussions in April.
...
After June 2, 2025, market participants believe that the Warrants will trade cumulatively for the June payment, unless market participants expressly agree otherwise with respect to a particular transaction. Interest will accrue on the June payment at a rate of 7.75% per annum.

Because of it, we once again call on all Western partners of Ukraine:

Express your unconditional willingness to support the Ukrainian authorities in their quest for a sustainable solution to the warrant problem, particularly by securing through legislation that in no European court, especially in the UK, warrant holders can enforce their claims on Ukraine!

Prevent predatory hedge funds from diverting Western aid money to Ukraine into their own pockets