Ukraine court bans payments on $3 bln loan from Russia

Thursday, June 2, 2016 - 23:00 (EEST) Section: Latest news, Top stories

The Holosiivskyi District Court of Kyiv has issued a ruling banning any payments on a $3 billion loan issued by Moscow to shore up the government of then-President Viktor Yanukovych in late 2013.

It is reported that the ruling was issued under a lawsuit filed by Iryna Verigina against the Russian Federation to compensate for moral and material damage caused by Russia`s military aggression against Ukraine and the occupation of part of Luhansk region.

The court has also banned the Cabinet of Ministers of Ukraine, the Ministry of Finance, the National Bank of Ukraine, the State Treasury, other governmental authorities, their and/or other officials from undertaking any actions related to payments on the Ukrainian government external borrowings to the Russian Federation in the amount of $3 billion and interest accrued under the trust agreement concluded on December 24, 2013 between Ukraine, represented by the Finance Minister as per the instruction of the Cabinet of Ministers, and The Law Debenture Trust Corporation PLC.

As UNIAN reported earlier, Russia lodged with London`s High Court a suit against Ukraine after it had defaulted to pay the principal amount and interest on a $3 billion loan. The fact that the bonds were purchased via the Irish Stock Exchange makes the disbursement a private creditor debt. However, the Russian side insisted that this was an interstate debt, as the buyer was the state-owned National Wealth Fund. Ukraine added the $3 billion eurobond to the sovereign and sovereign-guaranteed bonds to be restructured, but Russia reiterated it did not consider the debt to be commercial.

In the course of negotiations, Russian authorities insisted on better restructuring terms than offered to other creditors, which is prohibited by the bond swap memorandum concluded between Ukraine and the bond holders.

Ukraine has restructured the debt under the IMF`s Extended Fund Facility program approved by the IMF Executive Directors in March last year. In December 2015, the IMF decided that the claim arising from the $3 billion eurobond issued by Ukraine on December 24, 2013, and held by Russia`s National Wealth Fund was an official claim for the purposes of the Fund`s policy on arrears to official bilateral creditors. At the same time, the Fund revised its lending policy with respect to debtor countries with payment problems, including Ukraine, enabling the IMF to continue its lending program even in case of non-repayment of Russia`s loan.

Read alsoRada extends indefinitely moratorium on ”Russian debt” repayment After Russia`s refusal to participate in the debt operation, Ukraine on December 18 announced a moratorium on any payments of the Russian debt, including repayment of $3 billion, which was falling due in December 2015.

According to lawyers and debt market experts polled by UNIAN, the upcoming trial with Russia will be cumbersome and may take several years. At the same time, experts say the trial itself does not pose a threat to Ukraine, and the court ruling in Russia`s favor will not be sufficient grounds for instant payment of the debt, while Ukraine may not have problems with access to new loans from the IMF and other official creditors.