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​Fitch: Ukraine’s capital two steps away from default

​Fitch: Ukraine’s capital two steps away from default
The Fitch rating agency has downgraded Kiev's long-term rating, as the Ukrainian capital failed to repay its domestic $87 million debt. The move could be classified as a “restricted default” if the city fails to settle bonds by October 10.

The rating agency cut Kiev’s long-term foreign and local currency rating to CC from CCC, and its national long-term rating to BB from BBB, the statement says.

Initially the review date for Fitch's rating of Kiev was scheduled on October 10. But after the city announced a restructuring of domestic bonds and its failure to repay the scheduled tranche of 1.125 billion hryvnia ($87 million) on October 6, the agency decided to issue the reassessment before the date in order "to reflect adverse deterioration in its credit profile."

Fitch considers Kiev's recent inability to honor immediate refinancing needs as materialization of significantly increased refinancing risk. The weakness of the domestic capital market puts additional pressure on the city's already distressed ability to service its debt. The city will also be refinancing its two outstanding $250 million Eurobonds and 1.9 billion hryvnia domestic bonds coming due in 2H15,” the agency said in the statement on Tuesday.

Fitch also "expects volatility in Kiev's budgetary performance due to the lower predictability of potential fiscal changes as national parliamentary elections are scheduled on 26 October 2014."