Update about war-affected assets in Ukraine (July)
[Eddited on 04.08.22] In the recent update about Loan Originator’s “Chain Finance” borrower, we informed about the status of repayments of May, plans regarding investments, and operational level. Debitum has received the latest information and data about June, and we have summarized it for you to read. If you are interested in the last blog article on this topic, you can read it here >>>
Important new information
- The borrower has gained less than 50% of planned monthly repayments in June.
- The monthly payments of borrowers’ clients are decreasing gradually as some of the vehicles are repossessed /sold or bought out by the clients.
- Ukraine’s Hryvna has decreased its value by 23.33% against EUR compared to February 2022. This means that all collected amount and the outstanding portfolio has been reduced in value.
- It is expected that Hryvna will decrease further, depending on the escalation of the war.
- The borrower has managed to sell repossessed vehicles (an additional 1.2% of the total portfolio) with small to medium losses due to a significant drop in car prices in Ukraine. Vehicle prices have plummeted in Ukraine since import tax has been revoked during the state of war
Regarding repayments for claim rights related to Ukraine:
- No principle or interest repayments will happen during Force Majeure.
- Penalty interest will not be applied as a reason for delayed payments in the Force Majeure situation stipulated in the agreement.
- After the Force Majeure ends, funds for the investor’s initial investment will be distributed equally to all involved investors and will not exceed more than the borrower’s available resources.
Why there are still not happening any repayment for these assets?
Force Majeure is in place and has been extended. While it is active, no business-related payments can be sent out of the Ukraine borders.
More information about the Martial Law in Ukraine:
rferl.org/a/ukraine-Russia-martial-law-extended
Status of repayments
In June, monthly repayments combined with income from the sale of repossessed vehicles have amounted to 279 216,09 EUR (calculated 26.07.2022, currency rate UAH/EUR, may decrease or increase dependently on the currency rate volatility). Excess amount after deduction of operational expenses have been transferred to a separate bank deposit account to keep funds of Debitum investors in one place
Collateral status
The borrower has managed to repossess 40 cars, and it is working to repossess other non-paying customer cars to sell them at a fair price in this market situation. In total, 10 vehicles have been already sold in the Ukrainian market. Other repossessed cars are stored in a secured parking lot to be sold as soon as possible.
Unfortunately, the current used car prices in Ukraine have decreased on average by 30%-40% compared to the pre-war period. Price decrease was affected by temporary legislation that allows bringing used cars from the EU to Ukraine without any customs tax as a measure to remove barriers to receiving vehicle aid from the EU. Additionally, the devaluation of Hryvna has made the matters worse and further decreased the value of the outstanding portfolio. Even though the maximum LTV for these loans was 70%, it is not possible to regain full value by selling repossessed cars in the current situation. Nonetheless, those vehicles for which the borrower receives payments according to agreed payment plans will remain in possession of the borrowers’ clients.
Portfolio part of lost, damaged, or not traceable have not changed – 40 cars. Out of these cars, 19 are damaged or used by the military. 21 cars are missing, and a vehicle search is taking place.
Further plans
The borrower will continue payment collection and sell any repossessed collateral to regain invested capital. Funds after operational costs will be kept in a separate bank account until money transfers outside Ukraine are permitted. Debitum expects ChainFinance to receive the first repayments from the borrower once force majeure ends.
Debitum constantly monitors and requests operational and financial data from the borrower to ensure the investor’s capital can be regained at the maximum rate.