In 2024, the financial market in Ukraine has remained resilient and stable even though the Russian full-scale military aggression against Ukraine approaches its third anniversary. This has been possible due to the continuing financial support coming from Ukraine’s allies and international donors. Notably, G7 leaders have recently announced a USD 50 billion lending package for Ukraine to be repaid with revenues from Russian frozen assets.
In 2024, the European Commission started disbursing a EUR 50 billion Ukraine Facility to provide mixed financing for the public and private sectors in Ukraine. This is another significant milestone that is expected to bring private investments to the country along with funding needed for urgent public projects. At the same time, international finance institutions and development banks have doubled their investments in energy, infrastructure, and agriculture industries. Banks and financial institutions have received substantial support in the form of risk-sharing facilities from international donors to finance SMEs and export trade. Also worth mentioning is the invaluable financial and technical assistance provided by USAID, GIZ, and other governmental and non-governmental institutions toward developing sound policies and a framework for financial markets.
2024 was also marked by the emergence of breakthrough war risk insurance products in Ukraine. In particular, DFC has provided a USD 50 million reinsurance facility for ARX, a subsidiary of Fairfax Financial, which is the first part of a larger USD 350 million war risk insurance mechanism for Ukraine. Another vivid example is EBRD’s commitment to providing EUR 110 million loss-covering guarantees to global reinsurers underwriting war risks in Ukraine. The Ukrainian government has also proposed a new law specifically regulating the insurance of war risks by the State Agency for War Risk Insurance to be established soon. In addition, the Ukrainian Export Credit Agency has successfully issued EUR 48 million in guarantees to protect investments in Ukraine against war risks. Finally, export credit agencies are set to continue backing new foreign equity investments in Ukraine against political violence risks. It looks like the last missing piece of the puzzle is coming into place for risk-averse foreign investors to change their minds and pour investments into Ukraine.
Generally, the last 12 months gave cautious hope to capital markets players. Sovereign borrowings set the baseline. Foreign and local currency domestic government bonds (so-called “War Bonds”) have remained popular among investors thanks to their relatively high interest rates and their “good deed” vibe of fending off Russian and Belarussian aggression supported by assault weapons and troops by Iran and North Korea. Approximately USD 20.5 billion of Eurobonds and the state-guaranteed debt of the State Agency for Restoration and Development of Infrastructure (ex-Ukravtodor) were successfully restructured with a significant cut of principal and a reduction of the coupon. Later, new sovereign Eurobonds backed by economic growth expectations rolled out, and investors lent money in exchange for 2027 cash flows, with excitement picking up after Donald J. Trump became president-elect on a vague promise to quickly stop the war against Ukraine.
For the first time since 2021, the Ukrainian corporate sector issued private bonds, starting with NovaPay, which, in 2024, placed UAH 300 million in unsecured bonds. Earlier in Q1, the securities regulator allowed law firms to become trustees, adding them to banks and other financial institutions as the fallback option, thus expanding the investor base free of conflict of interests. In Q2-Q4, Integrites proudly helped devise Novus’s innovative UAH 400 million mortgaged-backed trustee bond issue – our firm became the first ever trustee beyond financial sector licensees.
Riding the market trend, the securities regulator issued the new Corporate Bond Issuance Regulation in Q3 2024, effective in parallel with the 2018 general regulations. The new act clarifies aspects of specialized bonds’ issuance, administration, and circulation. A negative, albeit expected, development happened in November 2024, when Ukrenergo, the country’s electricity transmission system operator, suspended payments and declared technical default on the country’s first green and sustainability-linked Eurobonds due in 2028.
Noteworthy, the National Securities and Stock Market Commission is put in liquidation and a new entity with the same name is being set up after Ukraine’s Securities Market Authority Act was adopted in Q1 2024 to meet the EU acquis benchmarks.
By Igor Krasovskiy and Oleh Zahnitko, Partners, Integrites
This article was originally published in Issue 11.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
