A man runs in a park on a foggy morning, amid Russia's attack on Ukraine, in Kyiv, Ukraine December 3, 2025. REUTERS/Valentyn Ogirenko

By Karin Strohecker

LONDON, Dec 4 (Reuters) - A key group of Ukraine creditors said on Thursday it could not yet back Kyiv's proposal to swap $2.6 billion in GDP-linked warrants for bonds, a crucial step for the country to emerge from its debt default following Russia's invasion.

Ukraine launched its offer on Monday to exchange the costly economic growth-linked warrants for international bonds with a rising interest rate, plus up to $180 million as an up-front cash payment if the deal passes swiftly with widespread support.

The Ad Hoc Group of warrant holders said it had held substantive negotiations with the government on a number of points in Monday's proposal, including the terms of the new bond, and would continue the talks.

"Although progress has been made, consensus has not yet been reached on the Invitation, and the long-form documentation has not been agreed," it said in an emailed statement, referring to the terms and conditions of the proposed transaction.

"Should the outstanding issues be resolved in the coming days, the Ad Hoc Group expects to participate in the exchange offer."

Ukraine's finance ministry said it was currently evaluating the refinements of the legal documents as proposed by advisors to the Ad Hoc Group.

KYIV KEEN TO REWORK COMPLEX, COSTLY GDP-LINKED WARRANTS

Ukraine managed to complete a restructuring of some $20 billion in international bonds last year after defaulting on its external debt in 2022 following Russia's full-scale invasion.

However, it has struggled to rework the complex and costly GDP-linked instruments, which mature in 2041 and were issued back in 2015 to clinch restructuring of Ukraine's debt in the wake of Russia's annexation of Crimea.

Payments on the warrants are directly linked to economic growth - which could accelerate sharply in a post-war scenario - with the IMF estimating they could hit as much as $6 billion.

Ukraine's debt chief Yuriy Butsa was due to speak at a banking conference in London on Thursday and was also expected to meet with investors during his visit, according to three sources.

A group of the country's official creditors - including Canada, France, Germany, Japan, Britain and the United States - said earlier on Thursday that Kyiv's proposal on the warrant restructuring would contribute to restoring Ukraine's debt sustainability.

The IMF said it was currently analyzing the proposal and would closely monitor the response.

NO ACTION YET

The Ad Hoc Group urged warrant holders on Thursday to await further communication before taking any action on the government offer. It expects to publish a further update before 1700 GMT on Friday, the statement said.

In previous statements, the Ad Hoc Group said it represents more than 35% of the warrants, and identified holders well in excess of 60%. It says it is cooperating with those outside its group to work on a deal that is in investors' best interests.

The deal would clear the last major remaining hurdle in Ukraine's push to emerge from its 2022 default.

Ukraine's GDP warrants traded nearly 1 cent lower to be bid at 99.625 cents on the dollar on Thursday afternoon, Tradeweb data showed.

(Reporting by Karin Strohecker, additional reporting by Marc Jones, editing by Libby George and Gareth Jones)