The National Bank of Ukraine (the “NBU”) has introduced a number of important changes to the existing Ukrainian foreign currency legislation in order to encourage international financial institutions such as, among others, the EBRD and IFC (the “IFIs”) to lend more to Ukrainian business.
In particular, in accordance with the NBU Regulation No. 88 dated 7 September 2017 (“Regulation 88”) effective from 13 September 2017 the following exemptions would apply to the finance transactions involving Ukrainian borrowers, Ukrainian security providers and the IFIs as lenders:
• No NBU Registration: Loan agreements between IFIs and the Ukrainian borrowers are now exempt from the mandatory prior registration of such loan agreements with the NBU (“Exempt Loan Agreements”) and can be serviced in accordance with their terms from their effective date;
• UAH Based Loan Structure: Regulation 88 permits Ukrainian borrowers to enter into (and perform under) the Exempted Loan Agreements if the loan amounts in such loan agreements are expressed in Hryvnia while all factual advances under such loan structure must be made by the lender and be repaid by the borrower in a freely convertible foreign currency only;
• Simplified FX Purchase/Conversion: If the loans under any Exempt Loan Agreement were de-facto advanced by the IFI to the borrower in a freely convertible foreign currency (USD, Euro etc.), the Ukrainian borrower and the Ukrainian security providers (such as guarantors or sureties, if any) may purchase foreign currency on the Ukrainian FX market and make payments under such loan agreement and/or relevant security documents in favor of the IFI as lender/secured party abroad without any individual license from or the registration of the Exempt Loan Agreement with the NBU.
The foregoing NBU measures introduced by the Regulation 88 will not only significantly simplify implementation of IFI finance transactions in Ukraine but also may be seen to provide more possibilities for the transaction parties to mitigate their exposure to foreign currency risks while servicing the loans.