Ukraine asset management quarterly report

December 2023

This is the first quarterly report that reflects the Ukrainian borrower company “Motor Finance” business operations.

Investors with investments allocated in Ukraine will be informed about “Motor Finance” business results at least once a quarter.

We remind that in May 2023 a three-party agreement was concluded between “Chain Finance” (Loan Originator), the Ukrainian borrower company “Motor Finance”, and “DN Funding Alpha” LTD. According to the agreement starting from August 2023, “DN Funding Alpha” took over “Chain Finance” obligations management of invested funds by Debitum investors backed by assets and receivables located in Ukraine. “DN Funding Alpha” is a subsidiary of “DN Operator” LTD (Debitum platform). Therefore, Debitum directly represents investors’ interests in communication and cooperation with the Ukrainian borrower company.

Restructuring implications

According to the restructuring agreement Debitum investors will be able to recover invested principal amount under the following conditions:

• After the state of war is revoked in Ukraine and the prohibitions and limitations for the fund transfers from Ukraine to other countries are not in force anymore, the Ukrainian borrower makes the repayments of the principal based on the following schedule:

The annual investment rate of return in the period starting from the day of restructuring is 3% p.a.:

• Due to the destruction of assets (leased cars) and devaluation of the currency during the state of war regained funds by the Ukrainian borrower amounted only to 25% of total value invested by Debitum investors. Collected funds were kept in a separate bank account dedicated to Debitum investor repayments and did not generate any interest.
• To restore the assigned investment value to 100%, it was decided to permit the borrower to utilize the collected funds in their operations, subject to specified conditions. It was agreed that the borrower will pay 12% per annum on utilizing the collected capital, resulting in an effective rate of 3% (as the capital at disposal amounts only to 25% of the original value). 12% per annum on the original value would have effective costs of 48% per annum to the borrower and would not be economically feasible.
• interest payments (at a 3% annual rate) will be made monthly starting from the moment the Central Bank of Ukraine will permit international business-related funds transfers (the end of martial law),
• the interest accumulated from 01 June 2023 until the lifting of the transfer ban will be paid in a single installment shortly after the fact.

Business performance indicators (January 1 – October 31, 2023)

After the restructuring came into force, the goal of the business is to grow the portfolio by issuing new loans and maintaining operational expenses and disbursement quality within agreed limits.

Find business performance indicators in pdf – Business performance indicators Q1

“Motor Finance” finances the purchase of cars in regions of Ukraine that are not directly affected by the state of war. Also, when resuming active car financing, the company has reviewed and improved the existing rules for issuing loans. As a result, the quality of customers has significantly improved. Only 2.38% of customers delay payments for more than 90 days. In such a case, the company has the right to recover the car (there’s GPS built into each car and the company has an extra key) and sell it.

Another important aspect that affects sales and quality is the policy of the banking sector in Ukraine. New transactions are practically not processed by banks, which directs bank customers to “Motor Finance” and other non-bank lending companies for car purchases.

Due to the reasons mentioned above, the total number of financed cars in the reporting period has reached 210, which is 55% more than the originally planned amount of financing in the period.

As a result, profit in the period has also exceeded initially planned amount.

The amount of balance sheet assets of the company has increased from 58.7 million UAH to 70.086 UAH. Company assets growth is related to increased sales and successful recovery work with pre-war lease agreements (i.e., customers from occupied territories, customers who returned to Ukraine, recovered, and sold cars).