Fitch downgrades Ukraine’s rating to ‘limited default’: what it means
14 August 2024 16:19
РОЗБІР ВІД 
Fitch Ratings has downgraded Ukraine’s credit rating due to the start of the Eurobond restructuring. This is reported on the agency’s website.
Thus, Ukraine’s rating was downgraded from C to RD (limited default).
Fitch has also downgraded Ukraine’s $750 million 2026 Eurobond from ‘C’ to ‘D’ and affirmed other foreign currency bonds at ‘C’.
Reasons for the downgrade
“The downgrade to RD follows the expiry of a 10-day grace period for the payment of the coupon on the $750m Eurobonds, which was due on 1 August. This constitutes a default under Fitch’s criteria,” the statement said.
The next scheduled date for Fitch’s review of Ukraine’s rating is 6 December 2024.
Fitch also notes that the events in Ukraine justify deviations from the calendar and the agency may review the country’s rating earlier.
What does a downgrade to ‘limited default’ mean for Ukrainians?
Economic expert Oleh Pendzin assured "Komersant Ukrainian" that this phenomenon will not have significant consequences for ordinary Ukrainians.
“For us, ordinary Ukrainians, it means absolutely nothing,” Pendzin said.
He stressed that there would be no restrictions on Ukraine’s access to macro-financial assistance.
“We are talking about the rating in the commercial debt markets, where Ukraine has been absent since 2022. Everything we receive today is in the form of macro-financial assistance to Ukraine as a sovereign. Ukraine as a sovereign has relations with the IMF, as well as with our partners. Commercial borrowings were made when Ukraine issued Eurobonds and placed them on the international financial markets,” the expert said.
Pendzin explained why Ukraine’s rating was downgraded to ‘limited default’.
“Why ‘limited default’ – because by 1 August we had to either pay the coupon or conclude a deal. We have reached an agreement in principle, but only now, on 9 August, have the relevant documents been submitted to sign the restructuring of this debt and write off part of the debt by our creditors,” he said.
Until all the necessary documents are signed and the legal aspects are settled, the country will formally be in a state of “limited default”. This is because the coupon payment on the Eurobonds due on 1 August 2024 was not made.
“Until all these papers are signed, until the legal side of this issue is finally settled, Ukraine will be in a state of ‘limited default’, because formally, since 1 August, we have not made a coupon payment on those Eurobonds that were due on 1 August 2024. This is how it looks like,” Penzin added.
The expert stressed that this process will not have direct consequences for citizens. As soon as the legal issues are settled and the restructuring documents are signed, Fitch will return Ukraine’s rating to a negative outlook, but the ‘limited default’ status will be removed.
