Chadbourne & Parke LLP has acted for over two years on behalf of a group of 28 financial institutions from all over the world on restructuring the debt of Public Joint Stock Company “Kreditprombank,” one of the largest banks in Ukraine. On September 23, the restructuring was substantially completed with the conversion of over US$100 million of the consolidated debt of Kreditprombank into ownership of 47.783 percent of Kreditprombank. Work continues on the post-completion implementation of the restructuring agreements.

By converting their debt into such a significant equity stake in the bank, the lender group has strengthened the balance sheet of Kreditprombank and hopes to help create a stronger financial institution that is better positioned for a competitive future.

“The Kreditprombank restructuring is one of the more complicated workouts that we have been involved in, with significant legal, commercial and regulatory hurdles to overcome under considerable time pressure,” said Chadbourne Partner and Moscow office Managing Director Jennifer Handz.

Chadbourne fielded a multi-disciplinary team of lawyers from its Kyiv, Moscow and London offices to work on the deal. Ms. Handz and International Partner Oleg Mazur led the negotiation of the relevant restructuring and finance documentation and Partner Charez Golvala led the corporate work required to implement the debt to equity conversion.

During the restructuring process, Chadbourne has advised on a wide range of subjects, including insolvency risks, financing matters, banking regulatory issues, Ukrainian anti-monopoly and other consents, shareholders’ agreements and corporate governance, Ukrainian securities and corporate law, relationships with the National Bank of Ukraine, disputes among original shareholders and multi-jurisdictional completion arrangements. At its peak, the restructuring involved more than 20 Chadbourne lawyers.

The 28 creditors of Kreditprombank negotiated for several months before agreeing upon a framework for the restructuring of over US$400 million of debt in early February 2010. The lenders’ debt was consolidated in September 2010 and 40 percent of that consolidated debt was to be converted into subordinated debt and equity in Kreditprombank by March 31, 2011. However, in the space of six weeks in November and December 2010, the restructuring process had to be amended substantially to convert all $140 million of senior debt into subordinated debt in order to inject additional Tier 2 regulatory capital into Kreditprombank before the end of the year and still be sure that the conversion into equity would occur by March 31, 2011. Having completed the conversion of the senior debt to subordinated debt by December 21, 2010, Chadbourne proceeded to advise lenders throughout 2011 on a series of events that threatened to impact upon the completion of the restructuring. Finally, on September 23, the original plan of restructuring envisaged in February 2010 was completed with the conversion of $100 million of subordinated debt into equity in Kreditprombank, through a Cyprus-based special purpose company.