Concurrently, Moody's affirmed the Ca rating of the government's $3 billion bond scheduled to mature on 20 December, 2015.
Moody's also raised the country ceiling for foreign currency bonds to Caa2 from Caa3, whereas the country ceiling for foreign currency deposits was left unchanged at Ca. The country ceilings for local currency debt and deposits were also left unchanged at Caa2.
The decision to upgrade the sovereign rating of Ukraine's government to Caa3 is based on the following key drivers:
1. Settlement of the restructuring of $15 billion in privately-held Eurobonds issued or guaranteed by the government, which eases Ukraine's debt-service requirements and strengthens the country's external liquidity; and
2. Progress in political and economic reform under the auspices of the IMF-led programme, supporting a rebalancing of the economy and a meaningful reduction in public and external financial deficits.
Moody's decision to assign a stable outlook on the government's Caa3 issuer rating reflects the current balance of risks, taking into account both the stronger external position -- including an easing of debt service requirements in the coming years -- and continuing multilateral/bilateral financial support, against a still highly fragile political and economic situation.
The $3 billion "Russian" bond is beyond the restructuring list, Moddy's notes, therefore it bears significant risks.
"The Ca rating reflects the increased default risk of this bond and differentiates it from the rest. The Russian government refused to undertake negotiations to restructure the bond, although more recently it has softened this position somewhat," reads the statement. "The rationale for leaving the rating at Ca is Moody's expectation that a restructuring will eventually be agreed but potentially with losses higher than the other bonds that were exchanged, should the delay in reaching such a settlement be extended."