Fitch downgrades Kyiv to 'Restricted Default'

Fitch has downgraded the City of Kyiv's Long-term local currency Issuer Default Rating (IDR).

This is reported by Censor.NET citing Reuters.

Fitch Ratings has downgraded the City of Kyiv's Long-term local currency Issuer Default Rating (IDR) to 'Restricted Default' (RD) from 'C' and its National Long-term rating to 'RD(ukr)' from 'CCC(ukr)'.

Read more: Fitch downgraded Ukraine's foreign currency IDRs to "restricted default"

In this case the deviation was caused by the exchange of distressed local currency bonds issued by the city.

The downgrade of Kyiv's Long-term local currency IDR follows the extension of maturities of the city's domestic bonds (series G and H), totalling UAH 4.29bn, by 12 months each, from the original maturities of 1 October and 7 December 2015, respectively. The city's decision to extend maturities was approved by the national government and the restructuring did not involve a write-down of principal or a decrease in coupons. Fitch treats restructurings of domestic bonds as defaults in accordance with its distressed debt exchange (DDE) criteria. Therefore we have downgraded the city's Long-term local currency IDR and National Long-term rating to 'RD' and 'RD(ukr)'.

The affirmation of the city's Long-term foreign currency IDR at 'C' (default is imminent or inevitable), reflects expected restructuring of its outstanding USD250m and USD300m eurobonds due in November 2015 and in July 2016, respectively. According to Ukraine's Ministry of Finance the restructuring process of Kyiv's external debt obligations would follow the restructuring of sovereign eurobond obligations. The Cabinet of Ministers of Ukraine required the City of Kyiv to extend the maturity of its external debt as part of a broader exercise to support Ukraine's public sector finances and external liquidity following the introduction of the IMF's extended fund facility for Ukraine in March 2015.

Fitch expects Kyiv's budgetary performance to remain volatile. This is due to the overall weakness of the sovereign's public finances, lower predictability of the country's fiscal policy and a short planning horizon, exacerbated by a negative macro-economic trend.

Kyiv's Long-term local currency IDR will be upgraded shortly after Fitch determines that the exchange has been accepted. The new rating will be consistent with the city's prospective credit profile and debt structure.

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However, the rating will likely remain low, given high country risks and Ukraine's 'CCC' Country Ceiling. Fitch would expect to downgrade the city's Long-term foreign currency IDRs to 'RD' (Restricted Default) at the point of execution of the exchange offers on outstanding senior bonds, should they go ahead and if this restructuring meets Fitch's DDE criteria or if the city misses the payment according to original schedule.

Источник: https://en.censor.net.ua/n355549