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1 апреля 2010

Диверсификация источников привлечения капитала

Автор: Армен Хачатурян
Источник: IFLR 1000. - 2010. - апрель

Статью можно прочитать ниже на языке оригинала.

Diversifying capital raising

At the beginning of 2010 many Ukrainian companies are hesitant or unable to enter international financial markets because of the financial crisis and political uncertainty caused by the presidential elections in January-February 2010. The global recession badly affected the real estate sector and practically froze activities on raising debt or equity capital.

After gaining 135% in 2007, Ukraine was the world's best performing equity market. But it did not have enough time to build up big volumes of either investment or trading before it practically collapsed in the midst of financial insanity two years ago. International debt and equity capital markets that had served Ukrainian borrowers so well for the past five years shut their doors after a long period of investor doubts due to the deteriorating global credit conditions. Dozens of Ukrainian IPOs, private placements and Eurobonds launched in 2008 were put on a disappointing hold one after another, with even bold and well prepared borrowers admitting upon consultation with their advisers that "this is not a good time". Many debtors, in order to avoid defaults and bankruptcies, started exploring opportunities for restructuring of their outstanding debts. One of the biggest challenges related to restructuring remained insufficient regulation of relevant procedures. Internationally common restructuring know-how and techniques for settling difficulties in relations between issuers and bondholders have not yet been properly implemented in Ukraine. Moreover, as a rule, corporate bonds are not secured and in a bankruptcy claims of the bondholders are the fourth priority, leaving them with little chance of a return on their investment.

Bondholders' rights were also negatively affected by recent regulation of the National Bank of Ukraine (NBU) prohibiting from early repayment of banks' debt securities except for redemptions at a price lower than 50% of the face value that does not lead to considerable worsening of the bank's liquidity. The resolution was not registered by the Ministry of Justice, but appears to have been applied by Ukrainian banks in practice since July 22 2009. The completed and pending restructurings once again revealed that absence of specific regulation on debt-for-equity swaps creates significant difficulties for efficient restructurings - and needs to be addressed by legislators and regulators without delay.

With a trace of market improvements, both worldwide and in Ukraine, it appears that later in 2010 when political turmoil subsides and the economy starts to recover, companies will start looking at international sources for funds needed to keep the economy running, overhauling old assets and further expanding operations structurally and geographically.

Diversification of finance instruments will then return to the agenda of many companies and banks considering such finance tools as Eurobonds, syndicated and bilateral loans, various project finance structures, IPOs and private placement of shares, as well as securitisation of assets. International financial and capital markets with their scrutiny and formality proved to discipline Ukrainian businesses seeking capital and make them a part of the global economy.


Based on the history of Ukrainian corporate and municipal Eurobonds, loan participation note (LPN) structures almost guarantee success for those seeking long-term funds in large amounts; $100 million is historically seen as the minimum amount for a feasible Eurobond placement.

When suspended projects restart it is expected that they will be structured as traditional limited ecourse LPNs relying on Rule 144A or Regulation S in the US.

These structures, however, are still subject to uncertainties of Ukrainian finance regulation. Due to adverse interpretation of the rule in the Commercial Code that Ukrainian companies "may draw foreign currency loans from foreign financial institutions", only foreign financial institutions may provide loans to Ukrainian entities. There is a risk that a loan received from a lender that is not a bank or a financial institution will be invalidated. It remains to be seen whether the fiscal authorities and courts will consistently apply restrictive interpretation of the noted provision of the Commercial Code.

At the same time Ukrainian civil law distinguishes between loans (kredyty) and borrowings (pozyky). Under the Civil Code, a loan is provided by a bank or other financial institution, which is consistent with the restriction under the Commercial Code, while a borrowing is not subject to such a restriction. The relevant regulation applies registration requirements equally to loans and borrowings from foreign lenders. Thus, it can be argued that Ukrainian legislation allows Ukrainian entities (except for municipalities, which are subject to special regulations) to receive funds from lenders that are non-financial institutions pursuant to agreements on borrowing.

In October 2008, in an attempt to mitigate the negative consequences of disturbances in the world finance markets the NBU decided to abolish caps on interest rates under loans from foreign lenders (except for loans with less than one-year maturity, which continued to be subject to an interest rate limitation of 11%). Surprisingly, in November 2009 caps on interest rates under all loans from foreign lenders to Ukrainian borrowers in major foreign currencies (USD, EUR, GBP, AUD, DKK, ISK, CAD, NOK, SEK, CHF and JPY) were restored. The re-established interest rate limit is 9.8% for short-term (less than one year) loans, 10% for loans with a term from one to three years, and 11% for loans with a term over three years.

Interest rates under loans in non-convertible currencies and in convertible currencies that are not frequently used in international transactions are still subject to a 20% cap. Floating interest rates are now capped at Libor for three-month dollar deposits plus 750 basis points. The new regulation should not apply to existing loans unless they need to be amended. The NBU may refuse registration of loan amendments resulting in the interest (defined as including all related costs, such as interest, fees, commissions and other payments to the lender) exceeding the regulatory cap. This rule, however, would not apply if amendments relate to a change of a party's name, address, banking details or assignment of debt to a foreign borrower. Many experts and market players have already expressed their dissatisfaction with such changes, stating that the re-introduced caps will make international borrowings impossible for most Ukrainian banks and corporate borrowers (many believe that loans in a crisis may not be obtained even by the most reputable borrowers with an interest rate less than 12%). It is especially painful for the borrowers negotiating restructuring of their existing debt. NBU's interference in this process by establishing nonmarket interest limitations raises the risk of the failure of restructuring efforts by Ukrainian borrowers.

Capital and finance markets may be also affected by the Law on Amendments to certain Ukrainian Laws for the Purpose of Overcoming Negative Consequences of the Financial Crisis, adopted by the Parliament in October 2009. This law provides for a ban on early prepayments of loans received from foreign lenders. It will challenge the credibility of Ukrainian borrowers and become another obstacle on the way to getting finance. However in November 2009 a bill cancelled that ban on early prepayments of loans from foreign lenders.

The restructuring of corporate Eurobonds produced a number of success stories. One of the most discussed was Naftogaz. Upon its technical default on September 30 2009, Naftogaz agreed with its bondholders to exchange $500 million in Eurobonds for new bonds guaranteed by the state and maturing in 2014. The new bonds would have a coupon rate of 9.5% compared with 8.125% on the previous issue. SEC by a separate resolution allowed Naftogaz to issue foreign debt securities governed by foreign law outside Ukraine, explaining that the placement does not require the SEC's special permit specified in the Law On Securities and Stock Market. That decision was part of the restructuring requirements for the Government to grant security for Naftogaz's obligations before the bondholders. Prior to this only the Government was entitled to issue securities outside of Ukraine.

The SEC's decision further confused the issue of whether a direct issue of securities abroad is an option for a Ukrainian issuer.The Law On Securities and Stock Market removed the requirement for corporate bonds to be in Ukrainian currency. However, the relevant provision remains in the Commercial Code, leaving the matter unclear. The long-standing LPN structure for Ukrainian Eurobonds was developed to by-pass the restrictions of Ukrainian securities laws. It remains to be seen whether the SEC will create a position consistent with applicable law and whether the regulation of new Eurobond issues will be clear to the market. Thus, when a number of suspended or new Eurobond projects resume it is expected that they will be structured as traditional limited-recourse LPNs.

Under Ukrainian tax law, a foreign lender is subject to a 15% withholding tax on income derived in Ukraine as interest under a loan to a Ukrainian borrower, provided that such income is not attributable to a permanent establishment of the lender in Ukraine, and unless the provisions of the applicable tax treaty between Ukraine and the lender's jurisdiction provide otherwise. Under the applicable treaty between Ukraine and the respective state on the avoidance of double taxation, the rate of taxation of interest received by the qualifying lender under the loan may be reduced or brought down to zero.

The table shows the 10 jurisdictions' with the most reduced rate on interest payments under tax treaties, provided that the requirements for the lender to enjoy the tax benefit are satisfied.

The most reduced rate on interest payments

















The Netherlands


United Arab Emirates

Great Britain

















rate (%)











Reduced rate applies to

Interest payments under bank loans and commercial loans; beneficial ownership requirement


Interest payments under bank loans and commercial loans; beneficial ownership requirement

Interest payments under bank loans and commercial loans; beneficial ownership requirement

Interest payments under bank loans and commercial loans; beneficial ownership requirement

Interest payments under bank loans and commercial loans; beneficial ownership requirement

Beneficial ownership requirement

Beneficial ownership requirement

Relief from taxation is granted to banks, insurance companies and other companies that are engaged in the active conduct of business

Beneficial ownership requirement; application of reduced rate only

to amounts that payer and beneficial owner agree on absent a special relationship

Bilateral and syndicated loans

Syndicated loans remain an alternative to Eurobonds for borrowers seeking smaller amounts ($10 million to $50 million) for a term of one to five years. The floating interest rate for Ukrainian syndications has been competitive with the overall cost, involving participation fees and commission that is often cheaper than Eurobonds with fewer pre-conditions (the borrower's extensive financials and rating are not required, for example) and a shorter period for arrangement.

Traditional bilateral loans are still often used when the borrower is able to provide a seal-proof security. Moreover, under the circumstances for many Ukrainian borrowers bilateral loans remain the only source of international funding.

Project finance is also often used by large international banks and financial institutions (such as the EBRD or IFC) as a well developed finance technique mitigating common risks by sharing them with local sponsors and repaying the loan from project proceeds. Under a traditional project finance scheme, the financing is provided to an SPV created (sponsored) by one or several business enterprises for the purpose of building and operating a large-scale, long-term, revenue-generating infrastructure project. The loan is repaid from receivables generated by the project under off-take contracts with customers rather than from the assets of sponsors. Typical examples include power plants, oil and gas systems, ports and telecommunications networks.

IPOs and private placements

As noted, Ukrainian IPOs and private placements were badly affected by unfavourable market conditions in the second half of 2008, with many postponed projects. Prior to that, IPOs were a hot topic for academic reviews and discussions by practitioners at the numerous domestic and international conferences. As local capital markets are underdeveloped, a true domestic IPO is not yet attractive for corporate finance. Given an unequivocal prohibition of denomination of Ukrainian stock in foreign currencies and oppressive applicable regulations by Ukrainian securities supervisors, a direct IPO of Ukrainian shares in international markets remains a dream, while depository receipts have become an everyday practice and indirect issues through a holding SPV are ready to be launched by many.

Traditionally, an IPO of a Ukrainian company on international markets is carried out through existing or specially founded foreign holding companies or intermediate foreign vehicles by placements of either shares or private depositary receipts backed up by Ukrainian assets. A foreign SPV then injects capital into the Ukrainian company through capital contributions or loans.

An IPO through the issuance by a foreign depository bank of depository receipts (ADRs, EDRs, or GDRs) listed on a foreign stock exchange with underlying Ukrainian shares was frequently used in the past. Many of those issues were not intended to finance the Ukrainian issuer. Relevant depositary receipt programmes were of so-called first and second levels, with underlying shares admitted to the programme from the secondary market when the main purpose was to raise international awareness of Ukrainian businesses.

The private depositary receipt placements based on Rule 144A (exclusively among qualified institutional investors in the US) or Regulation S (outside the US capital markets) are easier to implement than heavily regulated ADRs of the third level. Both techniques, however, bring capital directly to a Ukrainian issuer. Certain legal issues pertaining to depositary receipts remain challenging and require special attention (such as beneficiary holding of shares under the depository agreement vs true ownership of shares under Ukrainian law, split voting rights by a depositary at the shareholders meeting of a Ukrainian issuer, discretionary proxy provision in the depository agreement regulating the management's control of the issuer, or currency control requirements related to payment of dividends). Under Ukrainian tax law, dividends paid by a Ukrainian stock company to a foreign shareholder are subject to 15% withholding tax, which may be reduced by an applicable tax treaty.

In 2009 share quotations of Ukrainian issuers on international stock exchanges went up after a fall in 2008. Based on these positive trends, issuers started to think about a successful secondary public offering (SPO) on even better terms. And companies that suspended or refused an IPO in 2008 started to consider them again. Construction company TMM announced that it is preparing an SPO and its affiliate Sintal Agriculture raised $13 million in October 2009 as a result of a successful private placement. As reported, agricultural company Mria is also working on an SPO while a number of other potential issuers plan offerings in the near future. Heavy-weight companies, such as Smart-Holding and East One, are approaching it at a slower pace. As noted in the media, these holdings will wait until the time is right to borrow from western equity capital markets, which will probably be no sooner than in 2011.


Known since the seventies, securitisation is now one of the dominant vehicles for capital formation worldwide. It converts assets, such as bank loans and credit receivables, into marketable securities for sale to investors by means of sale on a non-recourse basis of such assets by a bank (originator) to an SPV set up domestically or in a tax-friendly jurisdiction. An originator sells a portfolio of assets removing them from its balance sheet through a true sale. The true-sale test is bankruptcy remoteness of the originator from the SPV - the buyer. Normally securitised assets total at least $100 million.

Securitised assets may include residential mortgages, auto loans, leases (including automobile leases) and credit card receivables. Securitisation of such assets may be of interest to large Ukrainian banks, leasing companies and trading houses as a diversification of financing risk to attract immediate and relatively cheap capital.

To date only one Ukrainian bank, Privatbank, completed a classic securitisation in Ukraine. Before the crisis a number of leading Ukrainian banks announced their intention to securitise pools of consumer finance receivables. The benefits of securitisation may be worthwhile exploring under Ukrainian law, in order to create an attractive financing alternative at reduced cost of funds as a result of the segregation of the assets from the credit risk and higher credit rating of the securities issued by the SPV (which could be an obstacle for an unrated Ukrainian company in entering the capital markets and issuing debt in its own name).

As the Ukrainian legislature has not enacted any securitisation-specific legislation, securitisation structured as a factoring-based transaction will still be subject to complicated rules of Ukrainian collateral, currency control and banking regulations and remains to be tested in practice. In real terms, however, until the economic situation in Ukraine stabilises there is little chance of a successful securitisation project.

Author biographies

Armen Khachaturyan


Armen Khachaturyan is a senior partner of Asters and head of the banking, finance and securities practice. He has extensive banking, finance and project finance experience across various industries, particularly in relation to capital markets and lending transactions, and led his team on several Eurobond issues and IPOs. His practice areas also include M&A, general corporate advice, currency control, securities, energy, privatisation and employment law. Khachaturyan frequently advises foreign and Ukrainian clients on cross-border legal planning and regulatory issues related to foreign investment. Khachaturyan graduated from the National Taras Shevchenko University of Kyiv and the International Law Institute in Washington, DC. He is an LLM graduate of Yale Law School.

Khachaturyan is recognised as a pre-eminent banking and finance and M&A practitioner by Expert Guides,The Guide to the World's Leading Lawyers 2009. He is also featured in Chambers Global, PLC Which Lawyer? and the IFLR1000 as a highly recommended lawyer in banking and finance, capital markets and M&A transactions. In 2008 he was named Partner of the Year by the Ukrainian legal magazine Yuridicheskaya Practika.

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