Andriy Volkov: In 2021, the driver of the market for distressed assets will be the “clearing” of loans from state-owned banks, in whose portfolios $ 11 billion of NPL is concentrated
On April 28, the Ukrinform news agency hosted a press briefing by Andriy Volkov, founder and Managing partner of Investohills Partners Group of companies, on the topic “Changes and forecasts in the problem debt market in Ukraine”.
The Ukrainian market of distressed assets is one of the largest in Europe. According to the data of the National Bank of Ukraine and the DGF, the total volume of non-performing (problem) loans (NPL) in Ukraine is approximately $ 19.6 billion.
“At the same time, two or three years ago, the lion’s share of problem debts was concentrated in the Deposit Guarantee Fund of Individuals (DGF). But during this time, the fund has done a lot of work to clear the NPL of bankrupt banks, and by the beginning of 2021, only 19% of the total debt on the market, or about $ 3.7 billion, remains in the DGF, “ says Andriy Volkov.
However, in 2021, there will be a change in the trend and the driver of the market for distressed assets will be the “clearing” of loans from state banks, which currently have about $ 11 billion NPL in their portfolios. This is PrivatBank, in which “bad” loans are more than 58%, as well as Oschadbank, Ukreximbank, Ukrgasbank.
“The plan of work with problem debt, which was approved by the NBU Financial Stability Board, provides for a reduction in the amount of NPL in state banks by UAH 305 billion over three years. In addition, it is planned to launch the privatization of state-owned banks in 2021. But their successful sale is possible only after the recovery of loan portfolios,” explains Andriy Volkov.
The second important trend in the NPL market is the formation of an infrastructure for dealing with corporate problem debts and the distribution of existing debt among several major players, the leader among which is Investohills Partners.
“Today, the nominal amount of debt on the balance sheet of our company exceeds UAH 100 billion, and we have been leading the market of problem debts in Ukraine for several years. Only about 100 people are engaged in corporate debt in our company, and another 300 work in the field of distressed retail loans,” says Andriy Volkov.
According to Volkov, Investohills was able to become No. 1 in the market of problem debt in Ukraine for several reasons. First, the company has its own methodology for analyzing problem debts, which allows you to evaluate any debt portfolio in terms of “price/profit/risk”. Secondly, Investohills always tries to find investors for any distressed asset. That is, the company sets itself the task of helping the debtor and attracting funds to his business and the arrival of an investor allows you to create a new successful company on the site of a bankrupt enterprise.
“In addition, many years of practice have developed our ability to catch up with the so-called stolen assets. Now we can safely buy cases in which neither banks nor competitors see any benefits for themselves. There are cases when we purchase problem loans worth hundreds of thousands of dollars. On the one hand, working with such assets involves additional costs for legal processes, research and analytics, and is also delayed for a long time. On the other hand, we know how to return assets to the balance sheets of companies, how to recover their costs and make a profit,” says Andriy Volkov.
Investohills is also the only company in Ukraine that has created an investment fund that will invest in distressed assets.
“Our Investohills Helianthus fund has already attracted several strategic institutional investors who are ready to invest about $ 100 million in the acquisition of distressed assets. And in August 2020, we closed the first transaction for the fund in the market of distressed assets, buying out the portfolios of three banks from the DGF for a total of UAH 1.31 billion,” says Andriy Volkov.