Fitch downgrades Ukraine's rating to pre-default level

The Fitch Ratings international agency has downgraded Ukraine's long-term foreign-currency default rating to "C" from "CC" (from likely to inevitable).

Source: the agency's website

The downgrade of Ukraine's long-term rating reflects Fitch's view that the principal agreement reached on 22 July between the Ukrainian government and some Eurobond holders regarding the terms of restructuring, following the parliament's approval of the law last week allowing the government to suspend payments on external commercial debt, marks the beginning of a process akin to default, the statement reads.

The international agency notes that the agreement with creditors involves significant reductions in terms, including cuts to principal and interest, as well as extensions of repayment periods.

Fitch expects that the Ukrainian government will not service its external commercial debt, including the 2026 Eurobond coupon due on 1 August, until a restructuring agreement with bondholders is finalised.

The statement also mentions that the agreement with bondholders and the debt suspension law align with the Ukrainian government's efforts to implement a four-year program with the International Monetary Fund amounting to US$15.6 billion, which involves debt restructuring with substantial reductions to create fiscal space and restore debt sustainability.

Background:

• Ukraine has reached an agreement with the Committee of Eurobond Holders on a comprehensive restructuring of its external sovereign commercial debt. 
• The restructuring deal stipulates that creditors will write off 37% of Ukraine's Eurobond debt. In return, Ukraine will issue new Eurobonds. 
• Earlier, the Verkhovna Rada (the Ukrainian parliament) passed a bill allowing the government to suspend payments on external public debt until 1 October 2024.

Support UP or become our patron!