CDB provides $50 million loan to Ukrtelecom to modernize its technological infrastructure

CDB provides $50 million loan to Ukrtelecom to modernize its technological infrastructure In July 2015, China Development Bank (CDB) and Ukrtelecom JSC (also known as Ukrtelecom, Укртелеком, or PFTS: UTLM) signed a $50 million loan agreement to modernize Ukrtelecom’s technological infrastructure.

Ukrtelecom pledged some of its properties as collateral for the loan. The proceeds of the loan were used by the borrower to finance a contract with Huawei Technologies Ltd. As of December 31, 2018, the undrawn balance under the CDB loan amounted to $18,489,000.

The purpose of the project (supported by the CDB loan) was to modernize Ukrtelecom’s technological infrastructure in the six largest cities of Ukraine (Kyiv, Kharkiv, Odesa, Dnipro, Donetsk, and Zaporizhzhia); construct a management center in Kyiv; and support a fiber optic network roll-out in rural areas.

The ultimate goal of this project was for Ukrtelecom to provide its customers with broadband internet services with an access speed of up to 50 Mb/s using VDSL and up to 1 Gb/s using FTTH/GPON technologies. Implementation commenced in 2016.

However, it appears to have stalled because Ukrtelecom was deeply in debt and engaged in various debt-related litigations.

In February 2018, Ukrtelecom received from CDB a waiver of its rights to claim early repayment of the loan that arose as a result of these litigations.

This waiver was to remain in force as long as (a) court authorities did not take any adverse decisions related to the litigations; and (b) any amicable settlements resulting from the litigations did not have a significant negative impact on Ukrtelecom (in the creditor’s opinion).

Taking into account that all court decisions in the litigations that caused the failure to honor obligations under the agreement with CDB were made in favor of Ukrtelecom, CDB’s waiver of the rights to claim early repayment of the loan granted in February 2018 remained valid as at December 31, 2018.

In addition, in 2018, Ukrtelecom received a separate letter by which CDB confirmed its waiver of the right to claim early repayment due to untimely payment of interest and the availability of qualifications in an auditor’s report.