THE LATEST GLOBAL TRENDS, RISKS AND DEVELOPMENTS ON BUSINESS

The NBU introduces a number of exemptions from the moratorium on cross-border loans for ‘new money’ deals, ECA-backed financings, amongst others

In the past few weeks, the National Bank of Ukraine (the “NBU”) has been active in lifting the moratorium for certain cross-border loan repayments, which it introduced on 24 February 2022 due to Russia’s full-scale invasion. While the moratorium did not apply to loans provided by international financial institutions such as the EBRD, EIB, IFC, NIB and BSTDB, loans secured by Ukraine sovereign guarantees and others, it remained a problem for all other international lenders.

The amendments the NBU has introduced by Resolution No. 73 of 15 June 2023 and Resolution No. 77 of 20 June 2023, although not lifting the moratorium completely, will be crucial for lenders interested in financing reconstruction efforts in Ukraine. In particular:

(a) After allowing in September 2022 to repay a portion of the accrued interest under all external loans, last week the NBU allowed Ukrainian borrowers to service their loans provided by foreign export credit agencies or lenders which have foreign states (or foreign state banks) as their shareholders, or for which the foreign state acts as guarantor or surety;

(b) This week the NBU has further allowed Ukrainian borrowers to repay new cross-border loans received after 20 June 2023 subject to the following conditions:

• cross-border transfers of funds for payments of interest (including commissions, fees and other payments for servicing external loans) are subject to a maximum interest rate of 12% per annum, which also includes contingency payments such as cancellation fees and default interest, etc.;
• Ukrainian borrowers can make payments (principal, interest) under loans with a tenor of up to three years using only their own foreign currency (including the currency received from other cross-border loans);
• if the loan tenor exceeds three years, during the first three years Ukrainian borrowers can repay principal only using their own funds in a foreign currency, but can purchase foreign currency to pay interest, commissions, fees and fines under the loan. Starting from the fourth year, the borrowers will also be able to buy foreign currency to repay the principal amounts under such loans; and
• early repayment, mandatory prepayment and, most probably, acceleration of payment in case of an event of default under such cross-border loans would still not be allowed.

For more information, please contact Olexiy Soshenko, Managing Partner at Olexiy.Soshenko@redcliffe-partners.com and Olesia Mykhailenko, Counsel at Olesia.Mykhailenko@redcliffe-partners.com