Fitch Downgrades Ukraine’s Foreign-Currency IDRs to ‘Restricted Default’

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The FINANCIAL — Fitch Ratings has taken the following rating actions on Ukraine:

–Long-term foreign currency IDR downgraded to ‘RD’ (Restricted Default) from ‘C’; 

–Long-term local currency IDR affirmed at ‘CCC’; 

–Short-term foreign currency IDR downgraded to ‘RD’ from ‘C’;

–Senior unsecured foreign-currency issue ratings on all outstanding external issues affirmed at ‘C’; 

–Senior unsecured local-currency issue ratings affirmed at ‘CCC’; 

–Senior unsecured foreign-currency issue ratings on all outstanding domestic issues affirmed at ‘CCC’; 

–Country Ceiling affirmed at ‘CCC’.

KEY RATING DRIVERS 

The 10-day grace period on Ukraine’s USD500m eurobond maturing on 23 September 2015 has elapsed without payment being made. Fitch therefore judges Ukraine to be in default on its sovereign eurobond obligations.

On 24 September, Ukraine launched the exchange offer for approximately USD18bn in direct and government-guaranteed eurobonds. Fitch considers that this represents a Distressed Debt Exchange (DDE) under its criteria that results in material losses to bondholders and is being conducted to avoid default.

RATING SENSITIVITIES

Ukraine’s ratings will be upgraded shortly after Fitch determines that the exchange has been successful. The new rating will be consistent with Ukraine’s prospective credit profile and debt structure. The Ministry of Finance has said that it plans to conclude the exchange by 27 October.

KEY ASSUMPTIONS

Fitch assumes that the debt exchange offer announced on 24 September will be implemented. 

 

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