Investohills Group Success Story: Turning a Crisis into an Opportunity

How Andriy Volkov’s Investohills Group became a leader in Ukraine’s distressed assets market by developing an efficient business based on what other financial market players would rather get rid of, wrote by Focus.

Remember the lending boom of the mid-noughties in Ukraine? Foreign financial groups paid top prices to buy banks from their Ukrainian owners and get into the corporate and retail lending market. Businesses were getting multi-million loans for growth, while people used loans in foreign currency to pay for housing and cars. As a result, bank loan portfolios grew like a weed.

However, there was no market for distressed assets in a country where the financial sector was developing from scratch after the disintegration of the Soviet Union. Nobody transacted in the so-called NPLs or non-performing loans. Banks themselves have hardly been aware of what distressed debt is.

Years 2008 to 2011: Mortgage Loans Crisis and the First Deal with UkrSibbank

The 2008-2009 global financial crisis hit Ukraine hard. Hryvnia dropped in value, many businesses stagnated, and many Ukrainians lost their jobs. This is when unprepared banks first encountered massive defaults on loans. At that time, most of them hardly had any collection functions to work out bad debt. Financial institutions were unwilling to sell their NPLs because they had no idea how much to ask for them. Banks believed that a 50% discount on NPL was too much. The few buyers on the market hardly knew how to make money on this.

This opened a new niche for companies specializing in working out toxic debt. Responding to this challenge, banker Andriy Volkov, an Odesa native, founded Investohills in 2010, a company that grew later into a financial group and became one of the first professional players in Ukraine’s distressed asset market.

Initially, as Andriy Volkov recalls, banks outsourced collection to the company as a contractor until foreign-owned banks started selling large NPL portfolios. Being experienced in doing this abroad, they decided at some point that they had to sell the NPLs even at a big discount because the situation would keep getting worse further down the road.

Importantly, Investohills gained experience in working out bad debt by that time and got an understanding of how much they were worth and how much money the company could make out of them. Thus, Andriy Volkov decided to enter the NPL market as an independent player.

Investohills made its first major deal in 2011, buying a $650 million NPL from UkrSibbank. At that time, the bank was ranked fifth by total assets by the NBU. The deal amounted to $75 million or 11.5% of the original cost. Even that small amount paid for the toxic portfolio was financed by a loan provided by the selling bank. This deal has remained the largest in the Ukrainian NPL market to this day.

The litigation-heavy NPL portfolio of 12,000 mortgage and car loans bought by Volkov’s company was subject to 6,000 court cases. Hryvnia devaluation that prevented borrowers from being able to service their foreign-currency mortgage and car loans was the main reason for the bank to sell the loans.

But the loans turned out quite far from being hopeless. Within three years, Investohills managed to recover about 90% of its investment and receive payments on loans.

Other major financial market players of those times also started selling their NPLs at the same time as UkrSibbank.

Eventually, banks started dumping the toxic balance from their balance sheets—some of them that had been active on the foreign-currency mortgage loans market had NPL portfolios reaching 65% of the total loan portfolio.

2014-2017: Failing Banks, Their Portfolios, and Market Chaos

In 2014, Ukraine’s economy was bled white after the collapse of Yanukovych’s regime, the start of the war in the East, and the occupation of Crimea, with the NBU’s foreign reserves depleted and hryvnia set free by the National Bank rapidly devaluing again. This situation revealed the full extent of issues faced by the banking sector that gave a start to the so-called “bank fall.”

Banks earlier perceived as pillars of the financial market, such as Brokbusinessbank, Delta Bank, Imexbank, Nadra Bank, Platinum Bank, Bank Forum, Finance and Credit, VAB, et al., collapsed one by one in 2014-2015. In Andriy Volkov’s opinion, this became the driver of the next stage in strengthening and consolidating the distressed assets market in Ukraine.

Assets of the failed banks had to be disposed of by the Deposit Guarantee Fund (DGF). Together with them, the DGF was vested with the right to claim under corporate and retail loans. Borrowers often tended to stop servicing their loans after a bank failure. However, the distressed assets shot up even in the banks that managed to stay afloat, partly due to losses in Ukraine’s occupied territories. According to the NBU statistics, the percentage of toxic assets in the banking sector grew to the world-highest level of 58% (or UAH 591.53 billion) by July 2017.

During this period, Investohills focused on loan portfolios of failed banks. And the company had a lot to do. In early 2017, the carrying value of assets of the banks under liquidation by the DGF at that time amounted to UAH 418 billion. Given the distressed nature of these portfolios, they actually were at least 10 to 20 times cheaper. Thus, the DGF was willing to sell these assets at a huge discount to be able to compensate depositors for the lost funds.

“The problem was that there were no reliable tools for holding distressed asset auctions transparently and honestly. Attempts to work via DGF-accredited exchanges turned untenable due to the pervasive corruption both at these exchanges and among the DGF staff in charge of selling the bad debt. But the path toward online auctions turned to be long and thorny”, Andriy Volkov recalls.

2018–2019: Trading on ProZorro.Sales, Corporate Debt Restructuring

The market of distressed assets changed radically with the launch of ProZorro.Sales online platform, a real breakthrough according to Volkov.

The NPL market became transparent and accessible due to selling assets of troubled banks on the online platform. Large investors with deep pockets got wind of this development, and deal values went up perceptibly.

Investohills’ asset portfolio grew to almost UAH 100 billion over the three years of ProZorro.Sales’ operation. To give you an idea of the scale, this figure is on par with the top 10 banks.

The purchase by Investohills of a pool of Delta Bank, Nadra Bank, and Finance and Credit loans for UAH 849.4 million was the largest distressed assets deal in 2018-2019.

Andriy Volkov also gives an example of the portfolio of Forum Bank’s loans bought by Investohills for $4.5 million—Forum Bank was declared insolvent in March 2014. Mriya agricultural holding company, whose bankruptcy became one of the most high-profile events in the agricultural sector in 2014, was among its largest debtors. Investohills acquired the right of claim under Mriya’s loans for €6 million. According to Volkov, he managed to reach an agreement to repay this loan and make a deal with this portfolio profitable.

Importantly, players in the distressed assets market were not buying businesses to scrap them and sell the parts. According to Volkov, the companies instead have been and continue to be interested in restoring businesses that were often deliberately destroyed by their ex-owners, preserving jobs and production processes. He believes that this is the only way to increase the value of an asset to be able to sell it later at a profit. This is when the non-performing assets lying idle are returned to Ukraine’s economy.


About 100 specialists manage corporate loans for Investohills Group. Further 300 staff work out bad debts in the retail segment. According to Andriy Volkov, the key to success in managing human resources is to attract not only individual specialists but also existing teams capable of managing a particular line of business. Furthermore, Volkov strongly believes that a successful company must follow the principles of corporate social responsibility and take care of its employees by training them, developing corporate culture, encouraging personal development, taking care of their health.

2020-2021: Strong Leadership and Lookout for New Niches

Today, Investohills Group controls about half of the bad debt market in Ukraine. Andriy Volkov estimates the annual NPL market volume as close to $150 million. Assets offered for sale by the DGF account for the lion’s share of this amount.

In 2020, Investohills Group established Investohills Helianthus, an international fund that raised several dozens of millions in foreign investments into the Ukrainian market of the distressed debt in late 2021. Investohills-Vesta, a financial company of Investohills Group, sold almost entire its problem debt portfolio to two large specialized investment funds, Emso Group (UK and USA) and APartners Capital Group (Italy, Malta). These international funds manage a portfolio of distressed assets worth about $10 billion. In Ukraine, they bought a problem debt pool of several banks: Forum, Diamantbank, VTB, Fidobank, Delta Bank, et al.

This was the largest distressed assets portfolio deal on the NPL market last year.

In the future, Investohills Helianthus is going to keep raising foreign investments into the NPL market. The fund aims at bringing about $100 million of investments in Ukraine.

The company is not deterred by the DGF’s gradually disposing of the aftermath of the 2014-2015 bank fall, with the supply in the market expected to dry down soon. According to Andriy Volkov, the value of NPLs held in balance sheets of Ukrainian banks went down from UAH 595 billion to 423 billion over the years 2018 to 2021, while the DGF controlled assets totaling UAH 100 billion in value the last year; this is several times as little as a few years earlier.

Currently, Investohills keeps looking for new niches for investment, looking at the debt market in the gas sector and planning to take part in the acquisition of debts of state-owned banks and the privatization of state-owned enterprises.