Restructuring debt while the war continues

Alongside the official financing that has dominated this record, Ukraine has commercial debt: bonds held by private investors, with contractual repayment dates that did not pause because of a war.

What was done

Initially a standstill agreed with bondholders, deferring payments. Then a negotiated restructuring: an agreement with the creditor committee to exchange the existing bonds for new instruments with reduced value and extended maturities.

Crucially, this was agreed rather than imposed. A negotiated restructuring and a default look similar on a balance sheet and are completely different in what follows.

Why the distinction matters

A country that defaults unilaterally is shut out of capital markets for years and litigated against by holdout creditors, sometimes for decades. A country that negotiates keeps a relationship with the market and can return to it when conditions allow.

Ukraine will need to borrow commercially again during reconstruction. Preserving that possibility was worth the difficulty of the negotiation.

What made agreement possible

Credible information, an official-sector programme giving creditors a framework to assess recovery against, and the fact that a restructured claim on a functioning state is worth more than a defaulted claim on a damaged one. Creditors were not being generous; they were being rational.

The observation

Sovereign debt negotiations are conducted by a very small number of people and decide a country's financing conditions for a decade. It is among the least visible and most consequential work of this period.