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Fitch downgrades Ukraine’s credit rating

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The agreement between the Ukrainian government and some Eurobond holders in terms of restructuring marks the beginning of a process similar to a default, analysts say.

International rating agency Fitch Ratings downgraded Ukraine’s credit rating from CC (very high credit risk) to C (imminent default). The agency reported this the previous day.

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“The downgrade of Ukraine’s rating reflects Fitch’s view that agreement in principle was reached on July 22 between the government and some Eurobondholders on the terms of the restructuring, after the parliament last week approved the law allowing to the government to suspend commercial payments on external debt for three months, marking the beginning of a process similar to a default,” the statement said.

The agency said the agreement with creditors provides for a significant reduction in terms, including a reduction in principal and interest, as well as an extension of repayment periods.

Fitch expects the government to default on its external commercial debt, including the 2026 Eurobond coupon due on August 1, until a restructuring agreement with bondholders is completed.

The report also said the bondholder agreement and the debt suspension law are in line with the Ukrainian government’s efforts to implement a four-year, $15.6 billion IMF program that includes debt restructuring with significant debt reduction to create fiscal space and restore debt sustainability.

This is due to Ukraine’s preparation for the restructuring of Eurobonds worth $23.4 billion, the agency notes.

We remind you that on July 22 it became known that Ukraine agreed to payments on its external debt. This important step in the debt restructuring process will save $11.4 billion in debt service costs over the next three years.

Demand for debt restructuring intensified after international rating agency S&P Global Ratings downgraded Ukraine’s credit rating.

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Source: korrespondent

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