About the case



Parliamentary hearings

About VR Capital

About the case

In February 2019, VR Capital, one of the largest Western investors in Ukraine, bought Ukrzaliznytsia’s debts from Prominvestbank, which was UZ’s original creditor, at an open auction. Prior to that, VR received assurances from UZ management that the company had no objections about VR’s participation in the auction and was ready to rapidly achieve a restructuring of the debt.

After the auction, VR offered UZ a resolution of the indebtedness on highly attractive terms which would have provided over $110 million in permanent savings to UZ and conversion of the remaining indebtedness to Eurobonds. However, two years later, UZ continues to avoid restructuring and is trying to challenge its debt in court.

Acquisition of UZ loans

  • January 2019
    Finpoint, a Ukrainian financial advisor engaged on behalf of Prominvestbank, approached VR Capital to solicit interest in an auction of the bank’s loans to UZ.
  • February 13, 2019
    Richard Deitz, President of VR Capital, met in Kyiv with representatives of UZ, including CEO Mr. Yevhen Kravtsov, Mr. Ivan Yuryk, and Mr. Dan Bilak (both members of UZ’s supervisory board at that time). During the meeting, UZ representatives expressed no objections regarding VR’s participation in the auction and stated a desire to rapidly achieve a restructuring of the debt.
  • February 21, 2019
    Prominvestbank conducted the auction of its UZ loans in full compliance with Ukrainian legislation. The National Bank of Ukraine gave its prior approval to the auction structure and specified a minimum price of $113.8 million for the loans. The minimum price was based on the results of independent evaluations of the loans made by two third-party appraisal companies, KPMG and MNTS Transservis-1.

    VR Global Partners (VRGP), a fund through which VR Capital manages its assets, was declared the winner of the auction with a bid of $123.5 million. This bid was $9.7 million, or 8.5%, above the minimum price. As far as we are aware, the competition at the auction was robust, with at least one leading Ukrainian bank and another American investment fund submitting competing bids.
  • February 22, 2019
    VR executed a sale and purchase agreement with Prominvestbank and became UZ’s new lender.

VR’s attempts to reach an agreement with UZ

  • February 28, 2019
    In a letter to UZ VR Capital proposed an immediately executable resolution of the unregularized indebtedness on the following terms:
    1. Full write-off of all accrued fines and penalties
    2. Further write-off of 22% of the principal amount of debt
    3. Capitalization of all accrued and unpaid interest
    4. Conversion of the remaining indebtedness (amounting to $145,926,444) into Eurobonds of UZ
    VRGP’s proposal would have provided over $110 million in permanent savings to UZ through the write-offs of principal and penalties. In addition, the structure would have alleviated any immediate liquidity pressure on UZ by conversion to Eurobonds.
  • March 18, 2019
    VR representatives, at the invitation of UZ, took part in a meeting at which UZ was represented by Mr. Kravtsov, Mr. Yuryk, Mr. Bilak and other members of company management. At this meeting, UZ advanced an extensive list of “gating issues” to be resolved prior to entering into commercial negotiations. In addition, UZ asked VR to put on hold the legal proceedings that Prominvestbank had commenced. Despite its reservations, VR expressed its readiness to cooperate with UZ to resolve all issues raised at the meeting.
  • May 21, 2019
    VR representatives at a meeting with the management of UZ, in particular with Mr. Kravtsov and Mr. Yuryk, presented solutions developed by VR’s external legal counsel to eliminate the risks previously identified by UZ. Representatives of UZ were unwilling to accept any of the proposed solutions. By this time, it became clear to VR that the issues raised were devoid of serious legal substance and had been introduced as a bureaucratic maneuver to delay matters.
  • May 29, 2019
    VR in a letter to UZ expressed its frustration with the lack of progress towards restructuring. However, in an effort to give the negotiations another chance, VR provided a modified proposal that would address some of UZ’s further concerns and allow it to restructure its debt into a new loan with the possibility of exchanging for Eurobonds (instead of direct conversion into Eurobonds). The modified proposal also provided for a longer restructuring period.
  • July 15, 2019
    In a response to a letter from VR of May 29, UZ stated its willingness to restructure the debt but conditioned this willingness on the company’s being fully protected from “the legal risks concerning the validity of the deed of sale of rights of claims by PIB.” This was a reference to the so-called “double recovery” issue the company had previously raised. UZ requested VR to present a structure that would address this concern and expressed that it was “ready and willing” to reach a restructuring agreement subject to a satisfactory proposal.
  • July 18, 2019
    VR replied to UZ with a letter outlining proposed legal and execution steps to implement a debt restructuring. In particular, VR Capital proposed to eliminate concerns about “double recovery” by adding Prominvestbank as an additional party to the debt settlement process. In the proposed structure, Prominvestbank would enter into a deed of release with UZ, forever discharging UZ from any claims Prominvestbank might have in respect to the loans.
  • July 24, 2019
    A technical meeting took place in Kyiv between representatives of VR and UZ to discuss potential modalities for a settlement. UZ rejected all VR proposals and instead came up with ideas that they certainly understood to be unacceptable. In particular, UZ asked VRGP to
    1. Provide a bank guarantee to UZ to refund any amounts paid to VRGP as creditor if the transfer of loans to VRGP was found later to be invalid
    2. Agree that the parties would initiate new litigation over the validity of the loan purchase agreements between Prominvestbank and VRGP and litigate the cases all the way through the Supreme Court to achieve a final resolution to the question of “double recovery”
  • September 11, 2019
    After consulting extensively with legal counsel, VR sent a letter to UZ proposing that, in addition to all the prior protections built into VR proposal, VRGP would provide a guarantee that in the event the loans purchase from Prominvestbank was reversed any monies paid by UZ to VRGP would be returned. VR received no response from UZ to this proposal.
  • April 27, 2020
    VR sent a letter to Mr. Yuryk in his capacity as Acting CEO reminding him of VR’s prior letter on 11 September 2019, urging UZ to reestablish constructive dialogue with VR. VR received no response to this letter.
  • September 9, 2020
    VR sent a letter to Mr. Volodymyr Zhmak, the newly-appointed CEO of UZ, expressing VR’s willingness to enter into good-faith dialogue to achieve a resolution of the debt issue.
  • October 5, 2020
    Following UZ’s proposal, VR had an initial call with Mr. Zhmak and Mr. Yuryk. Mr. Zhmak proposed to immediately engage at a working group level to elaborate a suitable structure and framework documentation for a debt restructuring. Multiple calls between VR’s legal advisors and the company’s legal advisors ensued.
  • November 2, 2020
    To advance matters further, VR Capital sent an updated commercial proposal to UZ which entailed the exchange of all outstanding claims under UZ’s debt to VRGP into $210,000,000 of UZ eurobonds due in 2024. This exchange proposal offered a discount of approximately $111 million, or nearly 35%, of the then-outstanding claim amount. VR received no reply to this letter.


In total, 26 cases were open and ongoing in respect to UZ loans. Litigation has been the last resort for VR, caused by the extended lack of good-faith engagement by UZ, and was never VR’s intention in purchasing UZ loans.

  • March 9, 2021
    Case No. 757/10733/21-k
    Pechersk District Court of Kyiv issued an injunction in a ruling, purporting to prohibit the garnishment of funds from accounts of UZ in satisfaction of any claims of VRGP. The proceedings before the Pechersk court took place without any notice to VRGP and the ruling was not published in the registry of court decisions.
  • April 20, 2021
    Cases No. 910/20947/17, No. 910/21454/17, No. 910/19925/17, No. 910/7252/17
    The Supreme Court of Ukraine announced its decision in four debt recovery cases between VR and UZ, fully confirming the position of VRGP and ordering UZ to pay in full.
  • May 6, 2021
    Case No. 910/21454/17
    The State Enforcement Service arrested UZ’s funds as part of proceedings to enforce the order of the Commercial Court of Kyiv of December 21, 2020 on the recovery of UZ debts in favor of VRGP.
  • June 4, 2021
    Case No. 910/21454/17
    The Kyiv District Administrative Court in its ruling lifted the arrest from UZ funds and banned banks from blocking any banking operations and seizing UZ funds.
  • July 8, 2021
    Case No. 910/10565/17
    The Supreme Court issued a decision confirming the legality of the recovery of the debt from UZ in favor of VR with respect to the largest loan in the amount of USD 66 million. This is the fifth decision of the Supreme Court on the repayment of the debt by UZ to VRGP.
  • July 15, 2021
    Case No. 910/14104/17
    The Supreme Court of Ukraine upheld lower court decisions in favor of VRGP with respect to VRGP’s claim for repayment of debt of Ukrainian Railways in the amount of USD 15.7 million. This marks the sixth decision of the Supreme Court in favor of VRGP.
  • July 19, 2021
    Case No. 910/22113/17
    The Northern Commercial Court of Appeal rejected UZ’s appeal and confirmed the legality of the recovery of the debt from UZ in favor of VRGP with respect to a loan in the amount of USD 15.7 million.
  • July 27, 2021
    Case No. 910/5617/21
    The Commercial Court of Kyiv rejected the request of UZ to invalidate the contract by which VRGP acquired debt claims against UZ. In so doing, the court confirmed the legality of the purchase and sale agreement dated February 22, 2019 by which VRGP concluded its purchase of a portfolio of loans with a principal amount of $153 million.
  • September 16, 2021
    Case No. 910/5617/21
    The Northern Commercial Court of Appeal upheld UZ’s appeal, declaring invalid the contract for the assignment of UZ debt between Prominvestbank and VRGP. VRGP strongly disagrees with the decision of the court, which is clouded by alarming evidence of political interference and manifest violations of due process.
  • October 7, 2021
    Case No. 910/5617/21
    VRGP filed a cassation appeal against the ruling of the Northern Commercial Court of Appeal of September 16 and requested that the case be referred to the Grand Chamber of the Supreme Court.

    In its cassation appeal, VRGP addresses the public policy issues that would be impacted by allowing the unfounded ruling of the appellate court to stand. Such a ruling would strip solvent banks of critical means to manage their credit risks, leading to reduced recovery rates for Ukrainian banks on NPLs, greater systemic stress, and a generalized undermining of the capital strength and resilience of the banking system.

    The appellate court interpretation would also put Ukraine at odds with norms of banking systems throughout Europe, Asia, and the Americas as well as policy prescriptions of such institutions as the ECB, the IMF, and the Bank for International Settlements, which have all supported a robust secondary market in NPLs, including the active participation of investment funds as a crucial element in the toolkit for managing problem assets in banking systems.

Publications about the case

Press releases



Media about the case


Parliamentary hearings

Testimony of Richard Deitz, President of VR Capital Group, before the Temporary Commission of Inquiry of the Verkhovna Rada of Ukraine

On June 15, 2021, Richard Deitz, President of VR Capital, testified before the Temporary Commission of Inquiry of the Verkhovna Rada of Ukraine on inspection and assessment of the state of UZ. VR Capital placed into public evidence before the committee an entire archive of its correspondence with UZ regarding the ex-PIB loans, including all proposals made to the company and any responses received from UZ along with detailed testimony.

About VR Capital

VR Capital Group is an international asset management firm founded in May 1999. The firm manages approximately $5 billion in assets for its investors, primarily through its flagship fund VR Global Partners, L.P. (VRGP).

The firm operates via its principal offices in New York and London. Over 98% of the investors in VRGP are institutional investors from North America and Western Europe. These clients include several of the largest asset management firms in the world, a large number of university endowment funds from the United States, several of the largest charitable funds in the United States and family offices from the United States and Western Europe.

VR Capital is one of the largest western investors in Ukraine with a portfolio of holdings in excess of $1 billion. Following the Revolution of Dignity, VR Capital was the largest investor in the bonds of Ukrainian state-owned companies, including UZ, Oschadbank and Ukreximbank. VR Capital worked with these companies cooperatively, leading the creditor committees that facilitated the necessary debt restructurings of each company. The transactions helped bring the rapid healing and return of capital to Ukrainian markets in the period after 2014.

In 2017, VR Capital established a wholly-owned subsidiary, Elementum Energy, to construct and operate solar and wind farms in Ukraine. Elementum Energy has become the largest foreign-invested company in the sector with 28 solar farms and 2 wind farms. The company is managed by a Ukrainian team based in Kyiv.

In 2020, VR Capital led a committee that reached a $65 billion sovereign debt restructuring deal with the Republic of Argentina. VR Capital was a member of the creditor committee for Puerto Rico that in February 2021 struck a landmark deal for restructuring the island’s nearly $19 billion of debt.

VR Capital does not manage funds for any politically exposed persons. Specifically, VR Capital does not manage (and never has managed) funds for any current or former government officials in Ukraine. Press reports that have suggested otherwise are categorically untrue and are likely motivated by parties who opposed the transparent approach in which the UZ loan auction took place and now wish to reverse its results.

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