On 20 August 2015, the National Bank of Ukraine (NBU) adopted Resolution No. 551 which, with effect from 22 August 2015, introduced some additional restrictions in respect of cross-border loans of Ukrainian borrowers. Subject to certain exceptions, the Resolution effectively restricts the change of lenders and/or borrowers (e.g., through transfers or otherwise) under cross-border loans, as well as assignment of local loans to non-resident entities, by imposing a prohibition on their registration with the NBU, which is required under Ukrainian law to make payments abroad.
In particular, starting from 22 August 2015, the NBU will not register:
The exceptions from the rule above concern the following cases:
The restrictions are a temporary measure (currently expiring on 4 September 2015) aimed at preventing the outflow of currency from Ukraine. Still, given the history of the other NBU’s restrictions in place, it may be assumed that such new restrictions may also be continuously extended every three months.
The effect of the restrictions and possible solutions
As noted above, payments by a Ukrainian borrower under a cross-border loan agreement are generally permitted only in accordance with the terms registered with the NBU
As a result, the restrictions introduced by Resolution No. 551 may significantly affect the flexibility of transactions involving cross-border loans to Ukrainian corporate borrowers. In particular, they may impede cross-border debt investment activities, cross-border debt restructurings involving Ukraine as well as intra-group financial restructurings.
Due to the unclear wording of the newly introduced measures, it is likely that the restrictions would also affect non-commercial transactions where changes in the lender and/or the borrower are caused by corporate reorganisations (e.g., a merger or amalgamation).
As a result, any operations with loans to Ukrainian borrowers, including debt restructurings, will require higher level of sophistication and legal creativity (e.g. use of all types of “participation” structures and derivatives).
We continue monitoring the situation with respect to the imposed FX restrictions.