IFI’s Perspective on Ukraine’s Progress with NPL Resolution Framework 11/15/2018 8:23 PM Session 1 Insolvency procedure as a catalyst for wider use of OOCR and NPL resolution Pre-insolvency Rehabilitation under Article 6 of the Bankruptcy Law 26 April 2018 Kyiv, Ukraine © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Pre-insolvency procedures “Pre-insolvency proceedings can be characterized as quasi-collective proceedings under the supervision of a court or an administrative authority which give a debtor in financial difficulties the opportunity to restructure at pre-insolvency stage and to avoid the commencement of insolvency proceedings in the traditional sense.” European Commission, 2014.

Article 6 and best practice principles Law 8060 – proposed draft would completely replace Article 6 with a new pre-bankruptcy rehabilitation procedure Procedure meets the requires for pre-insolvency procedure outlined in EU Recommendations on Business Failure (2014) and Regulation 2015/848 on insolvency proceedings. Standard features include: flexible access requirements for financially distressed, viable businesses; debtor maintains control over day-to-day operation of its business; temporary moratorium imposed at the outset, or the debtor should be allowed to request one immediately following submission of the petition; pre-application rules ensuring a fair voting process. a restructuring plan adopted by a suitable majority of creditors by each class binding on all creditors if confirmed by a court; and bankruptcy safeguards to protect interim or new financing from challenges by creditors in the event of a subsequent bankruptcy

Key Features: Pre-Trial Rehabilitation (1) Classic “pre-packaged plan” with “pre-approval” requirement Debtor Initiates Automatic moratorium on acceptance of application until plan approval Plan must stipulate claims to be restructured, repayment terms, and measures Classification – claims can be grouped based on similar claims Liquidation analysis – mandatory to accompany plan Financial analysis – confirming debtor’s ability to repay (not mandatory but) Majority: secured = 66.6% majority (down from 100%); unsecured = simple Plan approval – not a basis for default on contracts (i.e., no ipso facto defaults) Rehabilitation manager – selected by debtor or creditors holding more than 50% secured amount (excluding interested parties), plan condition

Key Features: Pre-Trial Rehabilitation (2) Approved plan binds minority, dissenting and holdout creditors Opposing secured creditors bound to majority, but collateral rights intact State claims – bound to accept same treatment as unsecured creditors Tax claims – older than 3 years not recoverable or written off under plan Claims excluded – 1st and 2nd priority claims; claims not to be restructured Court’s role is limited, largely to confirming plan approval requirements No conversion to liquidation if the plan is not approved Swift (10-40 days) Amending BL Art. 6 makes procedure available to all debtors

Key Features: PTR vs LFR LFR procedure Administrative process/contractual Debtor remains in control Access: 50% of financial inst. debt Eligibility: financially distress viable Moratorium on commencement (limited – involved creditor/assets) Plan finalized/voted after Fully consensual (2/3 arbitration) Binds only creditors in plan Up to 180 days Independent expert verifies Pre-trial Rehabilitation Court supervised process/court order Debtor remains in control Access: no debt threshholds Eligibility: all debtors Moratorium on application (broader and can apply to all creditors) Plan finalized, voted, approved before Majority approved (66.6%/50%) Binds all creditors covered by plan 10-40 days Court checks process only/limited role Direct path from consensual restructuring process => Kyiv Appellate Court LFR benefits (taxes and safeguards) extend to PTR proceedings

LFR – BL Art. 6 flow chart Court Enforcement Commence No No > 66% Coordination Secretariat Administration Notice of application Notice of agreement or termination 90 days 90 days Court Enforcement Voluntary Restructuring Due Diligence Standstill or Moratorium Plan Preparation Negotiation Extended Negotiations Notice of moratorium Commence Application Accepted Bankruptcy suspension Process Terminated No No 100% Agreement Process Concluded > 66% Arbitration Committee yes Execution Agreement yes Full Consent Restructuring Agreement Kyiv Appellate Comm. Court Pretrial Rehabilitation (Court) (10-40 days) Art. 6 Law on Bankruptcy Requisite Majority < 100% creditor acceptance

Proposed Bankruptcy Law Article 6 procedure for pre-insolvency rehabilitation (panel discussion) Moderator: Gordon W. Johnson, President, EMA Global Panellists: Alexander Biryukov, Professor, Commercial Law, Univ. of Kyiv Olena Polyakova, Bankruptcy & Restructuring Counsel, Redcliffe Steven Franck, CRO, Innovation Brain and Director, Hellenic Financial Stability Fund