Fitch warned of the risk of a “limited default” by Ukrzaliznytsia
22 January 12:43
The international rating agency Fitch Ratings has revised the credit status of the joint-stock company Ukrzaliznytsia, lowering the issuer’s long-term default rating and Eurobond rating from “CC” to “C.” This was reported on the agency’s website, according to "Komersant Ukrainian".
Which ratings were downgraded
Fitch downgraded:
- Ukrzaliznytsia’s long-term issuer default ratings (IDR) in foreign and national currencies from “CC” to “C”;
- long-term senior unsecured LPN ratings: $703.2 million with a rate of 8.25% maturing in 2026; $351.9 million with a rate of 7.875% maturing in 2028;
- bonds issued by the British specialist company Rail Capital Markets Plc, which is wholly owned by Ukrzaliznytsia.
No outlook was assigned, as default ratings under Fitch’s methodology do not have outlooks.
The agency also downgraded the company’s national long-term rating from “CC(ukr)” to “C(ukr)”.
What does a “C” rating mean?
According to Fitch’s definitions, a “C” rating on both the international and national scales means that default is imminent or very close. Fitch also downgraded Ukrzaliznytsia’s standalone credit profile (SCP) from “cc” to “c” because the company has effectively entered into a process similar to default.
The key reason is the missed interest payment
Fitch explained that Ukrzaliznytsia failed to pay interest that was due on January 9, 2026, on Eurobonds maturing in 2026. After that, the company entered a five-business-day grace period provided for in the agreement.
The start of the grace or corrective period after failure to pay a material financial obligation corresponds to a “C” rating, which in Fitch’s methodology means “close to default.”
Coupon payments suspended
On the payment date, January 9, 2026, Ukrzaliznytsia publicly announced the suspension of interest payments on its 2026 and 2028 Eurobonds.
The company also announced its intention to begin a broader debt restructuring, engaging financial and legal advisors and initiating negotiations with securities holders.
Risk of “selective default”
Fitch warns:
- if the overdue payment is not repaid within the grace period, the ratings may be downgraded to “RD” (restricted default);
- if agreements with investors lead to a deterioration in bond terms that falls under the definition of a distressed debt exchange, the rating will also be downgraded to “RD”;
- if a bankruptcy petition is filed, the rating will be downgraded to “D.”
The role of the state and financial risks
Fitch Ratings noted: “Ukrzaliznytsia is a national integrated railway company with a natural monopoly in Ukraine’s railway sector.
It is the largest employer and plays a vital role in the country’s economy and labor market.
ESG factors
Fitch also drew attention to ESG risks:
- Governance — rated 5 due to close ties with the state and deferral of external debt payments;
- employee safety — rating 4 due to increased risks of working in a war zone;
- data protection and cybersecurity — rating 4 due to the increase in cyberattacks in the context of the Russian-Ukrainian war.
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