As war drags on, Western creditors urged to ease pressure on Ukrainian businesses over corporate debt

The ongoing bitter conflict in Ukraine has, tragically, cost of lives of tens of thousands of innocent people. But is has also proved devastating for the country’s business community, writes Martin Banks.

Ukraine businesses still find themselves in the crosshairs of not just Russian rifles, tanks and bombs but the demands of investors and creditors.

This is what prompted former senior MEP and EU Commissioner Danuta Hubner to tell this site: “We need to rebuild Ukraine’s economy and society.”

As part of the crippling economic fall-out of the current situation Ukraine's state-owned power grid operator, Ukrenergo, recently announced that it had halted payments on its dollar-denominated green bonds maturing in 2028 and was seeking to restructure its debt amid the ongoing war with Russia.

The company announced last week that it would suspend servicing $825 million worth of bonds, pending negotiations with bondholders to reach a fair and consensual agreement.

"The company will temporarily suspend payments under the notes on the basis of the decision of the Ministry of Energy," Ukrenergo said.

The move comes in the wake of Ukraine's $20 billion sovereign debt restructuring deal clinched in August, which provided relief for the country's public finances.

Ukrenergo's recent “technical default” highlights the mounting pressures faced by Ukrainian businesses burdened with corporate debt during the war.

While the government has secured agreements to restructure sovereign debt, even with its private creditors, which turned out to be much more difficult than with the sovereign bilateral lenders, corporate borrowers find private creditors less accommodating.

Many Ukrainian firms have suffered significant losses due to the conflict, yet their pleas for debt relief have often met with hesitation.

Two years ago, Ukraine’s Central Bank wrote to Ukrainian private companies experiencing financial problems because of the war, and told them to open negotiations with their creditors, recommending them to restructure and reschedule.

But problems emerged almost immediately and one debt market analyst told this site: "Ukrainian business leaders are effectively battling on two fronts.

"They are striving to maintain operations under the shadow of war while also negotiating with Western creditors who are often unwilling to fully recognise the extraordinary circumstances."One such company reportedly is UkrLandFarming, one of Ukraine's largest agricultural holdings owned by Oleg Bakhmatyuk. The company has faced heavy losses due to Russia's military aggression, losing approximately half of its value since the invasion began.

Chornobaivska, one of the main assets of UkrLandFarming and the largest poultry farm in Europe, located in the war-torn Kherson region, has seen 4.5 million birds die.

Buildings have been looted and damaged, critical infrastructure destroyed, and equipment taken by the Russian occupying forces to Russia.

The company has reportedly lost 160,000 hectares of arable land for agro-industrial production as its farms were also destroyed and looted. It is estimated that the total losses from the Russian aggression to be in the region of a huge $1.2 billion.

For long UkrLandFarming was besieged by lawsuits over its debt it has been unable to service and repay.

Good news came just a month ago when one of the lawsuits was reportedly withdrawn.

According to a statement by Ukrlandfarming on its website and also the Ukraine news agency Interfax, one of the largest creditors, Gramercy Funds Management LLC and its affiliates, voluntarily dismissed with prejudice their lawsuits against Oleg Bakhmatyuk and associated parties last October.

Market observers call the change of the attitude toward private external Ukrainian debt “pragmatic” and suggest that such actions could set a positive precedent, encouraging other creditors to consider more equitable and reasonable engagements with war-hit Ukrainian businesses.

There is a growing call on Western government creditors to ease legal pressures and offer debt relief to Ukrainian businesses, with proposals including a potential moratorium on taking legal actions against the war-torn country and its debtors in international courts.

"Western creditors need to adopt a more flexible and understanding approach," says a financial expert specialising in emerging markets. "By restructuring debts and suspending aggressive legal actions, they can help preserve the economic foundations of Ukraine, which is crucial for the country’s ability to resist Russian aggression, its post-war recovery and future growth."

Speaking exclusively to this site, former Polish MEP Danuta Hubner, also a former EU commissioner, said “massive” investment will be needed to help Ukraine businesses get back on their feet after a war that shows no sign of abating.

The centre right politicians said, “We need to rebuild Ukraine’s economy and society. To make this project realizable we need Ukraine’s private sector on board. Massive international investment is fundamental but equally important is local business with their widely recognized creativity, talent and expertise. The reconstruction process, while internationally backed, should be Ukraine’s led and driven,” said Hubner, a centre right politician.

“We should spare no effort in working with Ukraine  to broaden and strengthen its enterprise sector that will facilitate the absorption capacity of this devastated economy and make foreign investment successfully contribute to the future of this country,” added Hubner, who served as European Commissioner for Regional Policy from 22 November 2004 until 4 July 2009 when she stepped down to become an MEP.

Also commenting is Nazar Bobitski, a representative of Ukraine agriculture to the EU.

Bobitski, director of the EU Office of the Ukraine Agribusiness Club (UCAB), told this site: “In Ukraine's agricultural sector, currently the backbone of the country's economy (11% of GDP in 2023) direct costs of Russia's invasion amount to 80 billion USD, according to latest estimates of the Kyiv School ща Economics (KSE).

“Half of that is derived from costs associated with demining and clearing of land contaminated with explosives and combat-related debris.”

Bobitski continued: “Around 144 thousand square kilometers of Ukrainian land (roughly the equivalent of the area of two Czech Republics) needs to be demined or cleared from combat debris.”

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