Oschadbank completes restructuring of UAH 4.4 bln Ukrlandfarming debt

Ukraine’s leading farming holding Ukrlandfarming
(UKRLAN) and its subsidiary Avangardco (AVGR LI, AVINPU) signed a restructuring
agreement for a UAH 4.4 bln debt owed to state Oschadbank (OSCHAD), both sides
reported on Feb. 6. The deal was reached under a special law on financial
restructuring and was preceded by more than a year of negotiations,
Ukrlandfarming reported. “Reaching a deal with largest state bank is a signal
for international investors,” Ukrlandfarming owner Oleg Bakhmatyuk commented in
the company’s press release.

Commenting on the deal, Oschadbank wrote that
independent expert (Ernst & Young) concluded that restructuring is an
economically viable solution. The firm considered two scenarios, restructuring
and forceful collection of debt. The agreed conditions of restructuring “fully
account (fully account for?/ take into full account the?) recommendations” of a
working group at the Council of Financial Stability developed in January 2019,
the bank reported. The group included representatives of the Finance Ministry,
the National Bank and the State Deposit Guarantee Fund. Debt to Oschadbank
accounts for about 10% of the total debt of Ukrlandfarming, the bank stated.

Neither side revealed any parameters of the debt
restructuring.

Alexander Paraschiy: We assume
the deal involves no haircut of the face value of the debt, some symbolic
interest rate and postponement of the loan for at least ten years. So this
agreement looks encouraging for Ukrlandfarming and Avangardco, which were able
to reach their first large debt restructuring deal after almost three years of
being insolvent. The deal could serve as a benchmark for the holding’s
restructuring of other debts to Ukrainian banks and financial institutions.
That also increases the chance that the holding will be able to agree on debt
restructuring with its international creditors.

It also looks positive for Ukraine’s relationship
with the IMF. Recall, MinFin’s regular reporting on the progress of the state
bank’s bad debt restructuring is among the IMF’s structural benchmarks in its stand-by loan with Ukraine.