Hillmont Partners and AVELLUM proved before the Supreme Court: a corporate agreement as loan collateral does not create an interest for the creditor

The Supreme Court upheld the position of Hillmont Partners and AVELLUM that entering into a corporate agreement as collateral for a loan agreement is not a sign of creditor interest in the debtor.

Clients of Hillmont Partners and AVELLUM, US investors Argentem Creek Partners (ACP) and Innovatus Capital Partners, provided GNT Group with a US$95 million facility. The loan was secured by assets and mortgage of Olimpex Coupe International LLC (Olimpex).

Due to default on the loan repayment, at the request of Madison Pacific Trust Limited as the credit agent of ACP (Madison Company), the court opened bankruptcy proceedings against Olimpex.

On 1 January 2025, amendments to the Bankruptcy Code of Ukraine came into force, introducing the concept of creditor interest in relation to the debtor.

In order to deprive Madison of its voting rights at the creditors’ meeting and committee, opponents of the American investors raised the issue of recognising the initiating creditor as having an interest in the debtor, since a corporate agreement had been concluded to secure the performance of the loan agreement.

However, the Supreme Court found that the corporate agreement in this case was merely an instrument to secure the obligations under the loan agreement and did not grant the creditor the rights of the debtor’s management body. This decision of the Supreme Court is significant for the development of the practice of applying the new concept of “creditor interest” in bankruptcy cases.

Hillmont Partners was represented in the case by managing partner James Hart, senior partners Andrii Nyzhnyi and Valentyn Zasukha, and partner and head of the Lviv office Andrian Artsishevsky.

AVELLUM was represented by senior partner Kostiantyn Likarchuk and partner Vadim Medvedev.