Bond restructurings Implementation mechanisms: schemes vs. exchange offers December 2015 ■ a principal haircut; ■ extended maturity; and / or ■ a change in coupon (rate and/or whether the coupon is cash-pay or PIK). Exchange offers are based entirely on voluntary participation. They can only succeed if a critical mass of bondholders agrees to participate. A “carrot and stick” approach is used to incentivise participation and penalise holdouts. For background on the use of schemes of arrangement as restructuring tools, see here.
Following changes to legislation last year, Valentyn Gvozdiy makes recommendations to creditors
The Code
On 21 October 2019 the Bankruptcy Code of Ukraine shall come into legal force ("Code"). The rules on operation of the electronic trade system within bankruptcy proceedings shall become effective earlier, on 21 July 2019.
The Code amends the bankruptcy procedure of legal entities and introduces the bankruptcy procedure for individuals (which was not previously applicable in Ukraine).
New Provisions
The most significant changes are the following:
Провадження у справі про банкрутство наразі є справжнім марафоном для учасників, адже, за даними Doing Business 2019, середня тривалість процедури банкрутства в Україні становить приблизно 3 роки. Непоодинокими є випадки, коли справи про банкрутство тривають десятиліттями (наприклад, банкрутства великих державних підприємств).
Цього року набув чинності Кодекс України з процедур банкрутства, який вже у жовтні повинен змінити правила, за якими розглядаються справи про банкрутство. Чи не найбільш обговорюваною новелою Кодексу є запровадження процедури банкрутства фізособи. До цього законодавство України не знало такої процедури, як банкрутство звичайного громадянина.
Нова процедура банкрутства фізичної особи може бути корисною як кредиторам (в основному це банки та інші фінансові установи, які раніше активно кредитували фізичних осіб), так і боржникам, які мають непогашені кредити.
On 21 October 2019, the Code on Bankruptcy Procedures adopted by Ukraine’s parliament on 18 October 2018 (“the Code”) came into effect. The Code replaces the Act of Ukraine on Renewal of Debtor’s Solvency or Declaring It Bankrupt dated 14 May 1992 that applied previously. The Code has sparked controversy in Ukraine and until the last moment there were discussions whether its entering into effect should be postponed until a later date.
Launch of insolvency proceedings
On 25 September 2019, the Ukrainian Parliament brought into force law No. 112-IX (the “Law“). The purpose of the Law is to correct deficiencies in existing legislation and further promote out-of-court financial restructurings in the jurisdiction. The adoption of the Law comes in light of the high volume of non-performing loans which still exist in Ukraine.
The Law’s key provisions are as follows:
Success stories point to the potential effectiveness of new legislation but significant timeframe concerns remain
The idea behind Ukraine’s new financial restructuring legislation was to implement the best global regulatory and taxation practices used to revive the banking business. A growing number of the restructuring success stories based on the new law are helping to demonstrate the viability of the relevant procedures.
The recent years’ crisis and economic sanctions have led many foreign companies to consider winding down their operations in Ukraine, including through liquidation of their businesses. Those who are familiar with the legislative nuances of closing down a business in Ukraine understand that the principle of “one dollar in – two dollars out” is very appropriate to describe the balance of efforts and costs for opening a business and winding it down (the proper and legal liquidation of a company).
In a turning point for Ukrainian bankruptcy law reform, on 18 October 2018 the Ukrainian parliament adopted the Code of Bankruptcy Proceedings, which will replace the existing Law on Restoring Solvency of Debtors or Recognition of Debtors’ Bankruptcy that has been in force since 1992.