Ukrainian Railways Eyes New Restructuring Plan After Price Hikes

(Bloomberg) — Ukrainian Railways is working on a new restructuring proposal for $1.1 billion in bonds following the government’s decision to allow it to increase freight charges.

The Ukrainian government approved a 30% increase to rail freight prices, which took effect at the start of August, according to a spokesperson for the state rail operator. Ukrainian Railways, or Ukrzaliznytsia, is now working on the “next steps” for its restructuring, they said, adding that formal talks between the bondholders and the company have not yet restarted.

A first round of talks between the company and a group of its bondholders ended without a deal in April. One of the key sticking points for investors, which include hedge fund VR Capital, had been freight tariffs — the amount the government allows the rail firm to charge customers transporting cargo.

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Ukrainian Railways stopped paying interest on the bonds in January. About $700 million of the amount was due to mature last month but has not been repaid, with the rest due in 2028.

While the increase in freight charges may help put Ukrainian Railways in a better position, the 30% raise is below the 45% hike initially requested by the company, the spokesperson said. An additional 15% increase proposed for January 2027 has not yet been approved, they added.

The rail firm’s finances remain in a precarious position as a result of Russia’s invasion of the country, with attacks targeting infrastructure intensifying since the start of last year. Expenses related to repairs have increased, while Ukrainian Railways is also grappling with rising labor and energy costs.

At the same time, freight volumes have declined from pre-war levels. The passenger business, meanwhile, has consistently operated at a loss, according to a recent report from Fitch Ratings.

The plan presented earlier this year proposed cutting the amount of debt owed to bondholders by 20% and included a “principal adjustment mechanism” which would have altered the amount paid to investors based on freight volumes. It also called for the bonds to be extended to 2033 with an amortization schedule and an increase in coupons during the term of the debt.