Fitch Ratings reduces Ukraine’s rating to restricted default from ‘C’

(MENAFN) On Tuesday, Fitch Ratings downgraded Ukraine’s long-term foreign currency issuer default rating from ‘C’ to restricted default (RD). This downgrade follows the expiration of the 10-day grace period for a USD750 million Eurobond coupon payment due on August 1, 2026.

Fitch's decision reflects the Ukrainian government's recent actions and financial difficulties. On July 18, the Ukrainian parliament passed legislation allowing the government to temporarily halt payments on state and state-guaranteed external commercial debt until a restructuring agreement is reached with creditors. On August 9, Ukraine formally initiated a consent solicitation process to restructure its USD19.7 billion in outstanding sovereign Eurobonds. Fitch views this exchange offer as a distressed debt exchange, involving significant reductions in principal amounts and interest, along with extended maturities.

The RD rating from Fitch signifies that the issuer has either failed to make payments or engaged in a distressed debt exchange but has not filed for bankruptcy. Despite this downgrade, Fitch affirmed Ukraine’s local currency issuer default rating at ‘CCC-‘, indicating that Ukraine is expected to continue servicing its local currency debt, which will be excluded from the restructuring.

Fitch also cautioned that Ukraine’s long-term local currency issuer default rating could be downgraded to ‘CC’ if there are increased signs of default risk due to severe liquidity stress and diminished government financing capacity.

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