Ukrzaliznytsia is preparing a new proposal to restructure $1.1 billion in bond debt after the government allowed the company to raise freight transportation tariffs. The 30% increase in freight tariffs took effect in early August, although negotiations with bondholders have not yet officially resumed.
The state-owned railway company is working on the “next steps” in restructuring its debt, a company representative said. The previous round of negotiations with a group of bondholders ended without an agreement in April. Investors involved in the talks include hedge fund VR Capital.
One of the key points of disagreement for creditors was freight tariffs — the rates the state allows Ukrzaliznytsia to charge for cargo transportation. Investors had expected a tariff increase that would enable the company to boost revenue and improve its debt-servicing capacity.
In January, Ukrzaliznytsia suspended interest payments on its bonds. Around $700 million of debt was due to mature in July 2026, but the payments were not made. The remaining debt is due in 2028.
The increase in freight tariffs is expected to improve the company’s financial position, although the approved increase was lower than Ukrzaliznytsia had requested. The company initially sought a 45% increase, while the government approved a 30% rise. In addition, a proposal for a further 15% tariff increase from January 2027 has not yet been approved.
Ukrzaliznytsia’s financial position remains challenging due to the consequences of Russia’s invasion. Since the beginning of 2025, attacks on railway infrastructure have intensified, resulting in higher repair and reconstruction costs. At the same time, the company is facing rising labor and electricity expenses.
A further source of financial pressure is the decline in freight volumes compared with pre-war levels. Passenger transportation also remains loss-making, according to a recent report by Fitch Ratings.
The previous restructuring plan, presented in early 2026, envisaged a write-down of around 20% of the debt owed to bondholders. It also included a special mechanism for adjusting the principal amount, under which payments to investors could vary depending on freight volumes.
The proposal also envisaged extending the maturity of the bonds until 2033, introducing a gradual debt repayment schedule, and increasing coupon payments over the life of the new bonds.
Following the freight tariff increase, Ukrzaliznytsia now expects to prepare an updated restructuring proposal. Reaching an agreement with creditors on revised debt repayment terms is critical for the company, while preserving sufficient liquidity to maintain operations and rebuild railway infrastructure during the war.
