The guests of the 6th Kyiv Post CEO breakfast on April 22 bravely tackled the complicated issues of debt restructuring in a forum that brought together 13 top government and business officials. Dentons sponsored the event, moderated by law firm partner Natalia Selyakova in the Hilton Kyiv Hotel.
The participants discussed ways in which the public sector and many private sector businesses are managing to restructure debt holdings amid a two-year economic recession, preceded by rising public debt during the President Viktor Yanukovych administration from 2010-2014.
An intense focus of public concern is whether the new government of Prime Minister Volodymyr Groysman will meet International Monetary Fund conditions, including fiscal sustainability and progress against corruption, to win another $1.7 billion loan installment. IMF approval is expected to garner another $4 billion in Western credits as part of a $40 billion, four-year, multi-agency credit program that began in 2015. Ukraine has received $6.7 billion in loans from the IMF in 2015, the last $1.7 billion of which came on Aug. 4, 2015.
Additionally, in the public sector, Ukraine owes Russia $3 billion for bonds purchased in the last year of the Yanukovych administration. The debt is unresolved.
Ukraine’s public debt restructuring generated $15.3 billion in savings as part of a plan to bring public debt-to-gross domestic product under 71 percent by 2020.
In the private sector, companies have had to renegotiate debt for many of the same reasons, including the economic downturn accelerated by Russia’s war against Ukraine. So they have had to work out deals with creditors that include trading debt to company equity and, obviously, extending the maturity of the loan and/or forcing creditors to take a loss. Consequently, Ukraine’s corporate debt has declined substantially in two years.
As part of the economic stabilization, the National Bank of Ukraine imposed currency controls designed to bolster the strength of the hryvnia, suggest as the mandatory sale of foreign currency earnings. Restrictions will ease as the economy stabilizes. Other restrictions are designed to stop the flight of capital from Ukraine, including cracking down on the fraudulent assignment of debts to foreign entities.
Meanwhile, the central bank has taken aim at corrupt, non-transparent and under-capitalized banks, reducing the numbers by 33 percent – from 180 to 120 banks.
While liquidity has improved, to roughly $4 billion, lending still has not restarted for many reasons, including high-interest rates and the lack of strong creditors’ rights. Many banks found they had no ability to seize collateral for loans issued and that the courts were weak in granting and enforcing on deadbeat borrowers. Consequently, non-performing loans skyrocketed among many banks. Customers who lost money in insolvent banks were reimbursed up to Hr 200,000 by a state deposit insurance fund that spent nearly $3 billion.
Hopes for a return to economic growth depend on many factors, including an end to Russia’s war, stable government policies that attract investment and combat corruption, a rise in global prices for export commodities such as steel and grain and easier availability of credit.
Participants of the 6th Kyiv Post CEO breakfast included:
Natalia Selyakova Partner, Dentons;
Aleksandr Lyubarev, Metinvest Group director, corporate finance & treasury;
Oleg Churiy, deputy governor of the National Bank of Ukraine;
Vitaly Lisovenko, deputy minister of finance;
Grzegorz Shatkovsky, chairman of the board of Kredo Bank;
Sevki Acuner, Ukraine director for the European Bank of Reconstruction and Development;
Jerome Vacher, International Monetary Fund resident representative in Ukraine;
Brian Seel, U.S. Embassy in Ukraine attache from the U.S. Treasury Department;
Simon Cherniavsky, CEO of Mriya Agro Holding;
Sergey Konovets, deputy CEO of Naftogaz;
Gennadiy Radchenko, Ukrnafta executive vice president for social and sustainability;
Aleksandre Joseph, chief financial officer of Ukrainian Agrarian Investments;
Brian Best, managing director of investment banking at Dragon Capital;
Onur Anliatamer, chairman of the management board of Credit Europe Bank;
John Shmorhun, CEO of Agrogeneration;
Brian Bonner, Kyiv Post chief editor;
Alyona Nevmerzhytska, Kyiv Post acting chief executive officer;
Iuliia Krus, Kyiv Post projects manager; and
Kostyantyn Chernichkin, Kyiv Post photographer.
Read about past Kyiv Post CEO Breakfast events here:
Feb. 12, 2016:
Nov. 13, 2015:
Sept. 4, 2015:
June 12, 2015:
April 24, 2015: