Important! Changes in Ukraine asset management
We are delighted to inform that a three-party agreement is concluded between Chain Finance, the Ukrainian borrower company, and SIA DN Funding Alpha (Debitum). The agreement stipulates that starting from August, DN Funding Alpha will take over Chain Finance obligations to Debitum investors related to assets allocated in Ukraine.
DN Funding Alpha is a subsidiary of SIA DN Operator, the owner of the Debitum platform. Therefore, from the moment contracts come into force, Debitum will directly represent investors’ interests in communication and cooperation with the Ukrainian borrower company.
” Due to the war situation in the country, physical destruction of assets (loaned vehicles to clients in Ukraine) and a significant depreciation of currency have occurred. Also, martial law prohibits the Ukrainian borrower to repay investors the funding that has already been recovered. Therefore, since the beginning of the war, Debitum has been looking for ways to solve the issue of funds invested in Ukraine.
Although our platform primarily serves as a means for businesses to connect with investors (and vice versa), Debitum takes direct responsibility for the safety of the platform’s investors’ funds. We want to directly control and be able to influence the situation. Therefore, with the mutual agreement between all three parties and respecting the interests of the investors, we are restructuring Ukraine’s asset management and taking over the obligations from Chain Finance. We are pleased that Debitum has found a reasonable way for our investors to recover the principal invested in Ukraine,” Henrijs Jansons, CEO of Debitum comments on the situation.
Implications of the restructuring
Despite martial law, the situation in Ukraine has become more predictable in certain sectors and specific regions of the country. People go to work, businesses try to work as usual, and economic activity takes place. Our Ukrainian borrower has not only proven that it is able to manage the existing portfolio effectively but in 2023 has also started to serve new customers. Selection of each new customer and loan is done by performing careful evaluation and taking into consideration the overall situation. The last 6-month performance results confirm a positive trend in the Ukrainian borrower’s business results.
In collaboration with financial advisors and the regulator, we have agreed with the Ukrainian borrower on the restructuring of the liabilities.
The restructuring stipulates that Debitum investors will be able to recover invested principal amount under the following conditions:
- After the state of war is revoked in Ukraine and the prohibitions and limitations for the fund transfers from Ukraine to other countries are not in force anymore, Ukrainian borrower makes the repayments of the principal based on the following schedule:
- The annual investment rate of return in the period starting from the day of restructuring is 3% p.a.:
- Since the beginning of the war, Ukrainian borrower has accumulated about 25% or a quarter of the total amount Debitum investors have invested in Ukrainian assets. These funds were kept in a separate bank account for investor repayments. The average annual rate of return on Ukrainian assets has been 12% p.a., therefore it has been agreed that the borrower company will pay a quarter (the same proportion as of accumulated funds) of the initial expected rate of return – 3% p.a.
- interest payments (at a 3% annual rate) will be made on a monthly basis starting from the moment the Central Bank of Ukraine will permit international business-related funds transfers (the end of martial law),
- the interest accumulated between the signing of the restructuring agreement and the lifting of martial law in Ukraine will be paid in a single installment shortly after the fact.
“The market situation and our experience indicate that the situation in Ukraine will stabilize and improve in the long run. This has enabled us to develop a realistic business plan that, despite the current reduced value of the portfolio (depreciation to 40% of the initial value), ensures complete recovery of the principal amount invested by everyone,” comments Yevgenii Mator, CEO of Ukrainian borrower company Motor Finance.
“We have thoroughly evaluated the business plan proposed by the Ukrainian borrower. The data included is in line with the current situation and offers a realistic outlook for business development. The business plan confirms the projection of recovering the principal amount invested in the stated period. Therefore, we are taking responsibility and engaging in the restructuring project,” states Henrijs Jansons.
We invite you to send all questions related to restructuring to the e-mail created specifically for this issue – [email protected] .
We will contact and answer each investor individually and, if necessary, will hold a webinar to answer investors’ questions and provide more detailed information on the nuances of restructuring.
Once a quarter, Debitum and Motor Finance will prepare and share with investors the most current business activity report.