icon bookmark-bicon bookmarkicon cameraicon checkicon chevron downicon chevron lefticon chevron righticon chevron upicon closeicon v-compressicon downloadicon editicon v-expandicon fbicon fileicon filtericon flag ruicon full chevron downicon full chevron lefticon full chevron righticon full chevron upicon gpicon insicon mailicon moveicon-musicicon mutedicon nomutedicon okicon v-pauseicon v-playicon searchicon shareicon sign inicon sign upicon stepbackicon stepforicon swipe downicon tagicon tagsicon tgicon trashicon twicon vkicon yticon wticon fm

Fitch downgrades Kiev to restrictive default

Fitch downgrades Kiev to restrictive default
The Fitch rating agency has cut Ukraine's foreign currency rating to restrictive default after Kiev failed to repay $500 million in Eurobonds on September 23.

“The 10-day grace period on Ukraine's $500 million Eurobond maturing on 23 September 2015 has elapsed without payment being made. Fitch therefore judges Ukraine to be in default on its sovereign Eurobond obligations,” said a statement from the agency.

“On 24 September, Ukraine launched the exchange offer for approximately $18 billion in direct and government-guaranteed Eurobonds. Fitch considers that this represents a Distressed Debt Exchange (DDE) under its criteria that results in material losses to bondholders and is being conducted to avoid default,” the statement added.

A ‘restrictive default’ Fitch rating indicates a failure to pay on a bond, loan or other material financial obligation without entering bankruptcy or ceasing operations.
The Fitch’s downgrade comes after a similar move from Standard & Poor’s that downgraded Ukraine’s credit rating to 'selective default' on September 25.

A ‘selective default’ occurs when a borrower fails to pay one or more of its payment obligations, but continues to meet others.

In late August, a creditor committee led by Franklin Templeton (which owns Ukrainian bonds worth about $7 billion) agreed a 20 percent write-off of some $18 billion worth of Kiev’s Eurobonds. Repayment of the remaining will be transferred from 2015-2023 to 2019-2027.

Russia has refused to accept Ukraine's debt cut, saying it takes no part in “the so-called debt operation” and recommended Kiev pay in full the $3 billion due December 20 on time to avoid “both litigation costs and penalty interest for overdue payments.”

Ukraine is obliged to restructure its debt in order to get a $17.5 billion loan from the International Monetary Fund. The unwillingness of Russia to accept a haircut may prevent the IMF from unlocking the bailout.