The National Bank of Ukraine eased the martial law currency restrictions that apply to servicing certain cross-border loans, through recent amendments to Resolution No. 18 dated February 24, 2022 (in Ukrainian).

It is expected that these changes should enhance new financing to Ukrainian private business with the participation of ECAs, and foreign sovereign-related creditors.

Under Resolution No. 18, Ukrainian debtors are now permitted to repay the following:

• Cross-border loans, including repayable financial assistance
• Interest payments and other payments due under respective loan agreements (“Permitted Repayments”)

The qualification for this is that the loans are provided with the full or partial participation of entities considered as permitted creditors. These are:

• International financial institutions (IFIs) and the participation is in the form of a guarantee or surety
• Export credit agencies (ECAs) or a foreign state / authorized foreign person, including state-owned foreign banks, and this participation is in the form of a loan, insurance, guarantee or surety

Permitted Repayments can only be carried out upon maturity of the loan as set out in the loan documentation. Although Resolution No. 18 does not directly prohibit a shortening of the repayment terms, Ukrainian servicing banks are prohibited from servicing repayments under shortened terms.

Based on the above, please note the following:

• Permitted Repayments only include repayments under a loan agreement, not other types of agreements (security documents, sureties, etc.). At the same time, in addition to loan repayments, other types of repayments, provided they are under a loan agreement, are also permitted to be repaid.
• It isn’t necessary for the permitted creditor to fully cover the loan—Resolution No. 18 does not stipulate any threshold for the participation.

Please note that not only ECAs and IFIs are classified as permitted creditors but also other foreign sovereign-related persons, which under the Resolution include foreign states through their authorized foreign person, and foreign banks that have the foreign state as a shareholder.

• Repayments carried out before initially agreed terms, as reflected in the loan agreement, cannot be considered Permitted Repayments.

For new transactions, we advise lenders to consider with their counsels how to best structure and document the loan to ensure that they can take advantage of the Permitted Repayments.

The above changes came into force on 16 June 2023.