Update about war-affected assets in Ukraine (May)
Debitum continuously monitors the situation with ChainFinance issued loans to the borrower in Ukraine. Recently, upon our request, we have received more detailed information about what is going on and what are the plans for the future regarding investments in Ukraine. In this article, we will present the latest findings. If you are interested in the last post on this topic, you can read it here >>>
The borrower has provided us with detailed information about the repayments, collateral status, debt collection and further action plan.
Status of repayments
In April, ChainFinance borrower received 52% of scheduled payments from clients in the borrower’s bank accounts. Debitum has demanded the borrower to create a separate bank deposit account to keep excess funds in one place. These funds are meant for payments for the investor’s investments partially or fully after force majeure ends. We remind that Ukraine is still in a state of war. Therefore force majeure clause applies to all agreements. Moreover, no money transfers in EUR outside of Ukraine related to business can be made at the moment.
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 borrowers available resources.
Collateral (cars) status
60% of the borrower clients have continued to pay for the cars. For the nonperforming part of the portfolio, the borrower has started to retrieve cars from the clients to sell the cars and regain invested funds. At the moment, 14 vehicles are for sale in the Ukrainian market. The borrower will create a parking lot to store and sell the cars in one safe place. Unfortunately, the current used car prices in Ukraine have decreased on average by 30% compared to the pre-war period. Price decrease was affected by temporary legislation that allows to bring used cars from the EU to Ukraine without any customs tax, as a measure to remove barriers to receiving vehicle aid from the EU. Nonetheless, since the maximum LTV for these loans was 70%, selling the car even at decreased market value will allow gaining back a significant part of the investments. Meanwhile, all the 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 has reached of 40 cars. Out of these cars, 16 are damaged or used by the military. 24 cars are missing and a vehicle search procedure is taking place.
The borrower will continue payment collection and sell any repossessed collateral to regain invested capital. Funds remaining after operational costs will be kept in a separate bank account until money transfers outside Ukraine are permitted. In addition, the borrower has cut costs by 50% by decreasing employee salaries. Debitum expects that ChainFinance will receive the first repayments from the borrower once force majeure ends.
Debitum constantly monitors and requests operational and financial data from the borrower to make sure the investor’s capital can be regained at the maximum rate.