Ukrainian Railways wins battle over VR Global debt in top court

Ukraine’s Supreme Court has confirmed the invalidity of
the agreement based on which VR Global Partners purchased from Prominvestbank
the loans payable by Ukrainian Railways (RAILUA), the latter reported on Dec.
22. In this way, the court recognized Prominvestbank as the only eligible
creditor of Ukrainian Railways under the contested loan, it reported.

“Resolution of the conflict between Ukrainian Railways
and VR Global Partners has become the next step to financial stability of the
company,” commented Oleksandr Kubrakov, Infrastructure Minister and head of the
company’s crisis management team. The company is ready to fulfill its financial
obligations, but it must do so in favor of the eligible creditor and in
compliance with Ukrainian law, Kubrakov added.

The mentioned court ruling is not publicly available
yet, but we understand that this was Supreme Court’s hearing of a cassation
complaint by VR Global Partners to the ruling of Northern Appellate
Economic Court on Sept. 16. This court recognized the
sales-purchase agreement of the debt between Prominvestbank and VR Global
Partners as invalid. Its reasoning was that the deal was a factoring agreement,
which VR Global Partners had no right to conclude, based on Ukraine’s
legislation.

Recall, VR Global Partners purchased the debt of
Ukrainian Railways to Prominvestbank in February 2019. Based on the deal, the
total obligation of the railway operator to the bank of USD 255.1 mln was sold
for USD 123.5 mln. A couple of days before the deal, Ukrainian Railways “strongly recommended” that
potential buyers refrain from purchasing Prominvestbank claims. The bank, as a
subsidiary of Russian state holding, fell under Ukrainian sanctions in March
2017.

According to Ukrainian Railways, its obligations to
Prominvestbank were USD 153 mln as of beginning of 2021.

Alexander Paraschiy: As
Ukrainian Railways’ financial plan for 2021 does not assume any repayments of
the contested debt, Kubrakov’s statement of the company’s readiness to fulfill
its financial obligations does not sound sincere. The recognition of the debt
sales deal as a factoring agreement does not look logical, but, as we
understand it, such interpretation does not contradict legal practices in
Ukraine. This, and possibly the apparent political will to help Ukrainian
Railways has led to this court ruling. The ruling does not rule out VR’s
ability to successfully appeal in the future. At least, the ruling gives more
time for Ukrainian Railways to avoid payments under Prominvestbank loan
agreements, which will allow it to spend more funds on CapEx in the mid-term.