Rating agency Fitch upgraded Ukraine's rating to "CCC", thus the country emerged from "limited default", the rating agency reported on December 22, writes UNN.
Fitch Ratings upgraded Ukraine's Long-Term Foreign-Currency Issuer Default Rating (LTFC IDR) from "restricted default" to "CCC"
Details
As noted by the agency, the rating upgrade reflects a number of factors.
"Normalization of relations with commercial creditors: the upgrade of the long-term foreign currency IDR reflects Fitch's assessment that Ukraine has normalized relations with the vast majority of its external commercial creditors," the report says.
As noted, on December 18, it was announced that "99% of investors supported the exchange of Ukraine's outstanding GDP warrants, thus overcoming the 75% threshold for a full exchange." In conjunction with the successful completion of the restructuring of sovereign and state-guaranteed debt bonds in August 2024, Fitch noted, "Ukraine has already restructured 94% of its commercial external public and state-guaranteed debt."
"Restructuring of GDP warrants: Ukraine will exchange $2.6 billion of outstanding GDP warrants (excluding the amount held directly or indirectly by the government) for new C-Notes at a ratio of 1.34x ($1340 for every $1000 of warrants). The new C-Notes have an increased coupon rate, which rises from 4.0% to 7.25% by 2032, with amortization in three tranches starting in 2030. Holders who did not agree to the exchange will automatically receive $1360 in B-Notes for every $1000 of warrants, equally distributed between maturities in 2030 and 2034," the report says.
Ukraine's GDP warrants, as indicated, were issued as part of the 2015-2016 Eurobond restructuring and are intended for payments when the country's economic growth exceeds certain thresholds. In early June, Ukraine missed a payment of $665 million on these warrants.
"New C-Notes rated 'CCC+': We have assigned the newly issued C-Notes a 'CCC+' rating, one notch above Ukraine's long-term IDR for financial transactions 'CCC' and existing A- and B- bond ratings, reflecting their enhanced credit protection," the report says. It is noted that the nominal value of the new C-Notes "will more than double in any future restructuring."
It is also reported that Ukraine's ratings reflect a number of factors.
"Fundamental credit indicators: Ukraine's long-term foreign currency IDR at 'CCC' reflects significant credit risk, given the war and its macroeconomic and fiscal consequences." "These factors are balanced by a manageable debt service profile in the short term, significant foreign exchange reserves, and significant support from the EU. Average payments for servicing Ukraine's external commercial debt in 2026-2028 will amount to $0.9 billion, and the first maturity of restructured Eurobonds will not occur before 2029," the report says.
National currency IDR "CCC+" confirmed: the higher long-term national currency IDR reflects Ukraine's continued servicing of national currency debt, which is consistent with our expectations for preferential treatment of national currency debt obligations."
"The war continues, negotiations are ongoing: despite ongoing US-led efforts to achieve a ceasefire and, ultimately, a negotiated settlement, key negotiating issues reportedly remain unresolved, including potential territorial concessions or security guarantees. As a result, Fitch does not expect a reduction in hostilities in the near term," the report says.