The National Bank of Ukraine (NBU) passed a new Regulation No.996 lifting the ban on registration of transfers and assignments of cross-border loan agreements from 11 January 2016. This effectively allows foreign lenders to sell their Ukrainian exposures, and increases the variety of instruments available to Ukrainian borrowers for restructuring their debt.
The requirement to register with the NBU a cross-border loan agreement and any changes in its material terms, including changes in the parties, i.e. lender and/or borrower, is a well-known feature of the Ukrainian restrictive currency controls. From August 2015, the NBU has temporarily refused to register transfers and assignments of such agreements, which has effectively amounted to a prohibition of changes in the parties to existing cross-border loan transactions. Furthermore, sales of domestic loans to non-Ukrainian counterparties (which also entail registration of the resulting cross-border relationship with the NBU) were also restricted, which limited the options available to Ukrainian parties to restructure their debt.
The new Regulation No.996, while revoking the ban on registration of transfers and assignments, introduced additional documentation requirements. Document package submitted to the NBU will now have to include:
The NBU has allocated up to 30 calendar days to review the filing, and another 7 business days to carry out the registration (previously 5 business days), which should be factored in when planning a transaction.
Despite the lift of the ban, currency controls in Ukraine remain restrictive. In particular, the changes introduced by Regulation No.996 do not affect other temporary restrictions, such as the prohibition on prepayment of cross-border loans. This restriction is currently scheduled to remain in place until March 2016, but will likely be rolled over for subsequent 3-month periods until the economic situation in Ukraine improves.
Regulation No.996 sets a framework that is expected to be followed by borrowers seeking to restructure their existing loans and investors with the risk appetite for Ukrainian distressed assets.