By its Resolution No. 61 dated 10 July 2017 (“Regulation 61“), the National Bank of Ukraine (the “NBU“) made a further step towards relaxing the existing restrictions on prepayment of foreign borrowings under cross border loan agreements in foreign currency. In addition, the NBU simplified prepayment mechanics if these are aimed towards implementing debt-to-equity swaps scenarios.
Effective 11 July 2017, Regulation 61 introduced amendments to the NBU Regulation 410 “On the Regulation of the Capital Markets and the Foreign Currency Markets of Ukraine” dated 13 December 2016 whereby the NBU permitted:
(a) making prepayments under cross-border loan agreements involving:
- foreign bank as lender; or
- Ukrainian bank as borrower; or
- the lender and/or the borrower which wholly or in part are owned by an international financial institution (such as EBRD or IFC).
(b) Ukrainian banks as borrowers to prepay any indebtedness under the cross-border loan agreement directly to an “investment account” of the foreign lender opened and maintained by the lender with the borrower or any other Ukrainian bank provided that the funds so prepaid will be applied by the lender towards increase of the borrower’s capital (e.g. through purchase of the borrower’s shares or extending to the borrower a subordinated loan, the proceeds of which to be accounted as part of the borrower’s Tier 2 capital).