Fitch temporarily downgrades Ukraine's rating to restricted default

On Tuesday, the Fitch rating agency downgraded Ukraine's credit rating in connection with the start of the restructuring of Eurobonds, reported the agency's website.

At the end of last week, on August 9, Ukraine announced an exchange offer and a request for consent solicitation regarding changes in the conditions of existing Eurobonds. Restructuring will allow Ukraine to reduce public debt by $8.67 billion and save $22.75 billion in debt payments by 2033.

Rating agencies view this operation as a "distressed debt exchange" due to the involvement of forgiving a part of the loan principal and interest, along with extending the bonds' maturity date.

As a result of its failure to meet its debt obligations, Ukraine's creditworthiness has been downgraded by rating agencies. Specifically, the country's overall rating has worsened from 'C' to 'RD' (restricted default), and the rating of its specific $750 million Eurobonds due in 2026, on which Ukraine missed an interest payment, was downgraded to 'D'.

In 2022, when Ukraine agreed with private creditors to postpone payments on Eurobonds for two years, Fitch also lowered the rating to 'SD', but returned it to the 'CC' level five days later.

On August 2, 2024, S&P Global Ratings also assigned Ukraine a default rating of 'SD'.

On July 22, the Ministry of Finance announced that the committee of creditors agreed to write off 37% of the current amount of debt for 13 series of sovereign Eurobonds and to postpone repayment from 2024-2035 to 2029-2036.

After agreeing on all formal issues, Ukraine will issue two series of new bonds for a smaller amount (minus $8.7 billion).