Fitch raises Ukraine’s default long-term foreign currency issuer rating to ‘CC’

Fitch Ratings has upgraded Ukraine’s default long-term foreign currency issuer rating to “CC” from “RD” (Restricted Default).

As the agency explained, the upgrade follows the execution of the consent solicitation on August 11 to restructure the external debt.

“Nearly $6 billion of principal and interest on Ukraine’s Eurobonds have been deferred for 24 months, easing external debt servicing pressures, amid weakening international reserves and acute war-related spending needs. The restructuring has received the consent of 75% of bondholders (in total principal amount), above the required minimum of 66.7%,” reads the press release.

Despite this debt service relief, the “CC” rating reflects unresolved debt sustainability risks resulting from Russia’s attack, analysts note.

“We expect the war to drag on into 2023, pushing public debt above 100% of GDP, adding to the already huge costs of infrastructure and economic production, and fueling inflationary and external pressures. , while the sources of financing the deficit remain uncertain, so a broader restructuring of government commercial debt is likely in our view, although the timing is uncertain,” Fitch said.

As reported, international ratings agencies S&P and Fitch downgraded Ukraine’s long-term currency issuer default rating late last week. In particular, Fitch downgraded the country’s rating from C to RD because it viewed the postponement of foreign debt repayments as the completion of a distressed debt swap.