Loan restructuring: mutual benefit for banks and borrowers in times of crisis

Loan restructuring allows borrowers to ease their debt burden, and this step is also beneficial for lenders. Banks, in an effort to avoid an increase in the number of non-performing loans, usually meet their customers halfway by offering extended repayment terms, loan repayment holidays or lower interest rates. This was stated by economist and former member of the NBU Council Vitaliy Shapran in an exclusive commentary to UNN.

"Banks usually meet borrowers halfway. The following steps are used to mitigate the credit burden: extending the loan repayment period, introducing loan repayment holidays, or significantly reducing regular loan payments for 3-6 months, sometimes reducing the interest rate on the loan and/or revising the bank's fees. The terms of restructuring are 99% determined by the agreement with the bank, and each bank has its own terms and conditions and restructuring programs," said Mr. Shapran.

For businesses, restructuring is a chance to maintain operations and avoid bankruptcy, while for banks it is an opportunity to reduce the risk of loan default and the number of non-performing loans.

According to the economist, the reduction in the number of bankruptcies has a positive impact on the business climate and stabilization of employment.

However, according to him, sometimes the motives of the bank and the borrower do not coincide, and then the deal does not go through.

"The existence of specialized legislation certainly has a positive impact on the ability of businesses to avoid bankruptcy. However, it should be remembered that if a bank has liquid collateral for a loan that it can quickly sell, it will be less inclined to negotiate debt restructuring, or its terms will not be very lenient," Vitaliy Shapran points out.

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It is worth noting that loan restructuring is not a panacea, but a temporary solution that allows you to buy time and stabilize your financial position. It does not eliminate the problem, but it makes it possible to survive difficult times and avoid catastrophic consequences.

One of the representatives of Ukrainian business who have resorted to loan restructuring in response to financial difficulties is the owners of Gulliver BFC.

In this case, the debt restructuring was carried out in accordance with the law, which was developed at the initiative of the IMF and provided for special safeguards to ensure that the entire process was carried out without abuse. One of them is the involvement of third-party independent experts, which is why world-renowned companies were involved in this case. The experts offered more than 10 restructuring options and, in accordance with the law, chose the one that would maximize the economic benefits for the involved creditor banks. Thanks to the debt restructuring and the resumption of economic activity, Gulliver Construction Company managed to stabilize the project's financial condition.