Ukraine is seeking to strengthen its ties with the EU, its largest trading partner. Ukraine’s main exports to the EU are raw materials, including iron, steel, mining, agricultural and chemical products and machinery. The Deep and Comprehensive Free Trade Agreement between the EU and Ukraine entered into force on 1 January 2016. The Agreement aims to boost bilateral trade in goods and services between the EU and Ukraine in certain sectors.  However, this has led to economic retaliation by Russia, which in turn suspended a free trade deal between Ukraine and Russia.

The support of the International Monetary Fund (“IMF”) remains vital in preventing a greater on-going economic collapse. On 11 March 2015, the IMF approved a 4-year programme worth USD17.5 billion, as part of a broader USD40 billion international bailout deal. The funds were to be disbursed in 8 instalments payable over two years. However, only the first two instalments in 2015 were actually paid as political turmoil has delayed the third disbursement, worth USD1.7 billion, since October 2015.

Following months of infighting which led to political deadlock, Arseny Yatseniukresigned as Prime Minister on 10 April 2016. The new Prime Minister, Volodymyr Groysman, was sworn in on 14 April 2016 with the support of a coalition of Ukraine's two largest parties. With Groysman and the current President, Petro Poroshenko, Kiev is now firmly western-leaning.  However, more will need to be done to improve governance, fight corruption and reduce the influence of vested interests in policymaking if Ukraine is to secure the next IMF instalment.

Ukraine follows a civil law system where legislation consists of the Constitution, international agreements ratified by the Parliament, laws adopted by the Parliament, decrees of the President, acts of the Government and normative acts of various governmental bodies.

Ukrainian legislation, including procedural rules, has a number of notorious inefficiencies, which may be used by obligors to substantiallyprotract judicial proceedings and delay enforcement. Therefore, if obligors are not cooperative, it is likely that enforcement of payment obligations will be complicated.

Ukrainian legal and judiciary systems have been undergoing reforms for the past two years since the abolishment of Viktor Ianukovych’s regime. In 2014, Ukraine and the EU entered into an Association Agreement, pursuant to which Ukraine agreed to approximate its legislation gradually to the EU acquis in the areas listed in the Agreement, including laws on financial instruments, financial markets and financial services.

Contractual Subordination 

In bankruptcy, claims of general unsecured creditors have equal statutory ranking, regardless of any contractual subordination agreements. Furthermore, Ukrainian law would be deemed to apply in relation to the ranking of claims in bankruptcy notwithstanding any applicable foreign law governed intercreditor agreement. 

While Ukraine does not prohibit the use of intercreditor agreements, it does not recognise the concept, therefore such agreements are usually governed by foreign law.

Some comfort may be available through typical turnover provisions requiring a subordinated creditor to pass all monies received outside of an agreed waterfall to a senior creditor.


Security over Ukrainian assets is usually held under a joint/several creditor and/or parallel debt structure. These structures are untested in Ukrainian courts, but the general view is, if the structure is created under foreign law with the relevant creditor entering into the Ukrainian law security documents, it should be enforceable provided the creditor’s claim is validly created under the relevant foreign law. However, similar structures created under Ukrainian law may not be enforceable.

The benefit of the security generally passes to the new lender upon assignment of the underlying loan facility. Security over immoveable property requires execution of a separate assignment agreement.

Whilst Agency structures are generally enforceable in Ukraine, under Ukrainian law the creditors (and not the agent) will become parties to the security agreement. As such, following an assignment, the new creditor would have to be registered in the Ukrainian register of encumbrances over movable property. Each creditor may be required to participate in the legal proceedings as a standalone party. Trust structures are not recognised.

If a Ukrainian security agent is used (which is less frequent in practice, as foreign banks predominantly act as security agents in cross-border transactions), in case of insolvency of the agent all security proceeds will fall into the agent’s insolvency estate (i.e. it is not segregated for the benefit of the creditors).


Assignmentis the recommended method of transfer of a loan in Ukraine. A Ukrainian language version of the transfer document will need to be executed if a Ukrainian entity is a party.

English law novations could have the effect of releasing security granted in respect of the loan.

Participations are generally not used domestically, although a participation between two non-resident entities would not trigger a requirement to amend the National Bank of Ukraine (the “NBU”) registration of the loan agreement.


Registration of cross-border loans with the NBU is required prior to the initial advance by a non-resident entity and when commitment is sold to a non-resident entity, in order for the borrower to be able to lawfully perform its payment obligations under the facility. However, where a facility agent has been appointed (and, therefore, there is no change in the amount or the logistics of payments made by the borrower as a result of an assignment) it may be possible for the assignment to become effective prior to the NBU registration being completed.

The NBU has recently increased the level of scrutiny of cross-border loan transfer transactions. Detailed documentation relating to the transfer, including information regarding the ownership structure and ultimate beneficial owners of the transferee, has to be submitted to the NBU. The NBU may take up to 30 calendar days to review the filing, and another 7 business days to carry out the standard registration procedure, which should be factored in when planning a transaction.

Ukrainian law does not require borrower consent for a non-resident lender to transfer its rights under a cross-border loan. However, Borrower notificationis necessary to ensure that payments by the borrower to the existing lender do not discharge the borrower from their obligations under the loan agreement. Practically speaking, as the Borrower is responsible for the NBUregistration it will have to approve the transfer.

Registration of assignment of security with the Ukrainian state registers is necessary to maintain the original security ranking (but not for the legal validity of the assignment).

Registration of assignment of security over immoveable property is necessary to give legal validity to the assignment.

Interest Rate/Loan payments cap

Cross-border loans are subject to a borrower ‘total cost of funding’ cap (i.e. including interest, default interest, fees, costs and expenses) on all loan payments (except principal repayment).

USD/EURfixed rate loans are capped at 9.8% (less than 1 year maturity), 10% (1 to 3 year maturity) or 11% (greater than 3 year maturity). USD/EUR floating rate loans are capped at 3 month USD LIBOR plus 7.5%.

Loan early repayment prohibition

The NBU introduced a restriction on early repayment of cross-border loans (including upon acceleration) in early 2014 due to adverse economic conditions. The original duration of the restriction was extended multiple times and currently lasts until 8 June 2016.


Ukrainian courts will generally recognise a foreign choice of law provided there is a foreign element (i.e. a non-resident lender) and will also generally recognise foreign judgments where an international treaty applies.  However, it should be noted that Ukrainian courts have exclusive jurisdiction over matters involving real estate, including enforcement of mortgages.


No banking licence is required for a non-resident entity making a loan to, or purchasing a loan from, a resident entity. However, the borrower is required to register the loan agreement with a non-resident entity with the NBU in order to make payments thereunder.


Withholding tax is payable at 15% for non-Ukrainian resident entities receiving Ukrainian-source income from Ukrainian resident companies, subject to any applicable double tax treaty (the UK and US double-tax treaties with Ukraine currently provide for such tax to be reduced to zero).

VAT, capital gains tax and stamp duty do not apply to the purchase of a loan by a non-Ukrainian resident entity.

Shelley specialises in distressed debt and claims trading. She represents investment funds, brokerage firms, hedge funds and other financial institutions in connection with the acquisition and sale of syndicated bank loans, debt instruments, bond claims and distressed assets, in particular insolvency claims within Europe, the United States and Asia.

On 20 April 2016, the Loan Market Association (“LMA”) published revised versions of the Standard Terms and Conditions and User Guide which are now available on the LMA website.  Any trades with a Trade Date of 20 April 2016 or thereafter will be subject to the new Standard Terms and Conditions.

The revisions address FATCA withholding on US source “Fixed, Determinable, Annual, Periodical” income (“FDAP”), which could, in certain circumstances, include accrued interest, where that accrued interest would itself constitute US source FDAP income.  As a result of the addition of this language in the Standard Terms, parties no longer need to refer to the FATCA Riders as an Other Term of Trade.




Reorg Research reports that following a bondholder meeting at 3pm BST on21 April 2016, Noteholders representing approximately 87% of Ukrlandfarming’s USD500 million10.875% 2018 bonds took part in a vote pursuant to which 99% approved the agricultural company’s proposal to Pay In Kindtwo coupon payments and waive a number of defaults. The company has six months to complete its long-term debt restructuring.

The bondholders are advised by Cadwalader.

  • 2.    METINVEST BV

It has recently been reported by Reorg Research, that Metinvest, a Ukraine mining and steel group, has subordinated its debt to its shareholders on Eurobonds currently being restructured.  At the end of December 2015, Metinvest negotiated with holders of its Eurobonds to introduce a moratorium on any payments on the securities.  During the moratorium, the company aims to reach an agreement on the restructuring of the Eurobonds, in addition to their pre-export financing, in the amount of USD1,089bn. 

On 29 January 2016, Mrs. Justice Asplin sanctioned the Ukrainian company’s four month moratorium which is due to expire on 27 May 2016.  The company may request an additional two months of standstill to complete the debt restructuring by July 2016. 


DTEK, the largest power company in Ukraine in mining, coal processing and electricity, has been in restructuring negotiations with its bank and bond creditors since late 2015.  On 26 April 2016,  Chancellor Sir Terence Etherton of the High Court sanctioned its scheme of arrangement to implement a temporary moratorium on enforcement by bondholders until 28 October 2016 to give the company sufficient time to negotiate and implement a restructuring of its bank loans and bonds. Reorg Research reported that over 75% of the company’s USD160m 10.375% senior noteholders and USD750m 7.875% senior bondholders supported the proposal.

  • 4.    FERREXPO PLC 

The Swiss-headquartered iron ore company with assets in Ukraine abandoned its plans to restructure its USD905mdebt in April.  The company has been experiencing cash-flow pressure as a result of lower iron ore prices in the global market and reported that its EBITDA fell 37% year on year to USD313m from USD496m.  However, the CEO of the company, Kostyantin Zhevago believes that exporters such as Ferrexpo are benefitting from a decline in the value of the Hryvnia and the company has seen 6% higher production in Ukraine since 2014.  In addition, iron ore prices have recently recovered in 2016 and this has resulted in an increased revenue stream. 


  • 5.    NOVO BANCO  

The Financial Times has recently reported that a creditor group of Novo Banco, including PIMCO and Blackrock, are filing lawsuits against Banco de Portugal regarding the re-transfer of some of Novo Banco’s bonds back to the “bad bank” BES in December 2015.  The date of the hearing is to be confirmed and will be held at Lisbon’s Central Administrative Court. 


SunEdison Inc. is the largest global renewable energy development company. It develops, owns and operates renewable power plants which deliver electricity to residential, commercial, government and utility consumers. Its corporate headquarters are in the United States and it has offices and technology manufacturing around the world.

On 21 April 2016 SunEdison Inc. announced that it, and certain of its domestic and international subsidiaries, had filed voluntary petitions for reorganisation under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the Southern District of New York (Case No: 16-10992).

Reuters reports that the company has disclosed that it had assets of USD20.7 billion and liabilities of USD16.1 billion as of 30 Sept 2015 in its bankruptcy filing.

The company has secured up toUSD300 million in debtor-in-possession financing from its first-lien and second-lien lenders, and the bankruptcy court has approved the use of up to USD90 million of that amount on an interim basis. The money will be used to support its continuing business operations and minimize disruption during its bankruptcy.

SunEdison has made customary Chapter 11 filings with the bankruptcy court, including a first day declaration in support of the bankruptcy filing, a debtor-in-possession financing motion and an equity trading procedures motion. Additional information on the restructuring can be found here or by calling (855) 388-4575 (U.S. & Canada) / +1 (646) 795-6966) (elsewhere).

Information about the claims process will also be available here.


Glitnir Holdco ehf. 

On 12 April 2016, Glitnir effected an Optional Redemption of the Notes (in part) by payment in cash in an amount of EUR 36,309,845.

The aggregate principal amount of the Notes outstanding following the Optional Redemption Payment is EUR 899,139,177. Noteholders who wish to confirm the principal amount outstanding in respect of their holding of Notes can do so through the secured website.

Kaupthing ehf.

On 18 April 2016, Kaupthing announced that Paul Copley was appointed as Chief Executive Officer, effective 1 April 2016. Mr. Copley is also a member of Kaupthing’s board of directors.

On 20 April 2016, Mr. Justice Knowles, of the Commercial Court in London, dismissed a claim launched by Vincent Tchenguiz and related parties against Jóhannes Rúnar Jóhannsson (a former member of Kaupthing’s Winding-up Committee and a current member of Kaupthing’s board of directors).

The claim, lodged in November 2014, alleged that Jóhannsson and others conspired to pass information to the Serious Fraud Office, dishonestly and for their own commercial gain, in order to instigate an investigation into Tchenguiz and his related companies in relation to the collapse of Kaupthing in October 2008. Tchenguiz also claimed that Kaupthing and Grant Thornton UK LLP were vicariously liable for the actions of their representatives, but the Commercial Court dismissed the claim as against Kaupthing in July 2015.