U.K. Supreme Court completes hearing on USD 3 bln “Yanukovych debt”

The Supreme Court of the U.K. has completed hearing
the Russian appeal of the U.K. Court of Appeal’s ruling in
September 2018 on the so-called “Yanukovych debt,”
Ukraine’s Finance Minisrty reported on its website on Dec. 12. The ministry
referred to this debt as “USD 3 bin in Eurobonds purportedly issued by Ukraine
in December 2013.” The hearing lasted four days, “which confirms the importance
of the case and its legal complexity,” MinFin reported. The final judgment of
the case is expected “some time in 2020,” MinFin said.

Recall, Ukraine issued a two-year, USD 3 bln Eurobond in December 2013
that was fully purchased by a Russian state fund. The issue was a part of a
promise by Russian President Putin to lend Ukraine USD 15 bln as the country
approached a dollar liquidity deficit and lost its Western support after
then-President Yanukovych declined to sign the Ukraine-EU Association Agreement
in November 2013. In mid-2015, the Ukrainian government initiated restructuring
of all USD 18 bln of its then-outstanding Eurobonds and succeeded in reaching a
restructuring agreement with all its creditors but the Russian fund. In April
2016, Ukraine’s parliament imposed a moratorium on any payments related to the
“Yanukovych debt.”

The Russian side filed a claim in Summer 2016 with
U.K. courts demanding the bond’s immediate repayment, also insisting on an expedited review of its claim.
In March 2017, the High Court of London ruled that Ukraine has to repay the debt in full,
but Ukraine was allowed to appeal. In September 2018, the Court of Appeal
overturned the ruling of first-tier court, after which Russia filed an appeal
with the Supreme Court.

Alexander Paraschiy: If the Russian appeal is rejected by the Supreme Court (which we view
as likely), this case will be heard by British courts in full trial. This is
likely to last many years, with an unclear outcome. So far, we see a solid
chance that Ukraine will be able to avoid repayment of this debt, at least in
the mid-term.