A group of hedge funds holding Ukraine’s GDP-linked warrants, including Aurelius Capital Management and VR Capital Group has entered restricted talks to renegotiate a $500m payment due at the end of May, according to a report by Bloomberg.

The report cites unnamed people familiar with the matter as confirming that the discussions, which were initiated last week under non-disclosure agreements, are set to intensify this week in Washington during the IMF and World Bank Spring Meetings.

The warrants – originally issued as part of Ukraine’s 2015 debt restructuring – are complex instruments tied to the country’s future economic performance. With approximately $2.6bn in notional value outstanding, they were excluded from Ukraine’s $20bn debt overhaul last year, leaving hedge funds with a unique, asymmetric exposure as the war-torn nation seeks to stabilise its finances.

The hedge fund group is being advised by Cleary Gottlieb Steen & Hamilton LLP and PJT Partners Inc, while Ukraine has mandated Rothschild & Co, and White & Case LLP. A restructuring that involves a mix of cash and new bonds is reportedly under consideration, though the exact terms remain subject to negotiation.

The talks are taking place under “restricted” conditions — a standard protocol that allows parties to share non-public, market-sensitive information while temporarily restricting trading.

The GDP warrants were trading around 73 cents on the dollar on Tuesday, down from 88 cents in February, reflecting growing market uncertainty over the upcoming payment and potential restructuring terms.

While the payout — triggered by GDP growth thresholds — is potentially lucrative, Ukraine’s war-driven macroeconomic uncertainty and donor-driven policy environment complicate negotiations.

Neither Ukraine’s Finance Ministry nor advisers Cleary Gottlieb and PJT responded to requests for comment.