Both of the world's top bond credit rating companies - Moody's Investors Service and Standard & Poor's - on Dec. 22 said they had upgraded Kyiv's outlook on foreign and local currency ratings from negative to stable.
The upgrades come as Ukraine battles an economic crisis and Russia’s war
in eastern Donbas. While many international businesses are weary and showing
signs of leaving the market, the boosted ratings give a glimmer of hope for new
investments as the country enters the New Year.
“The main drivers of the city of
Kyiv’s outlook change are the substantial progress in negotiations with creditors
to restructure its foreign-currency debt, as well as the decrease in systemic
risk, given the Ukrainian government’s improved credit profile, as reflected by
Moody’s recent upgrade,” Moody’s wrote on its website on Dec. 22.
S & P improved its rating for
Kyiv to “CCC+” from “D” following Moody’s steps.
The “C” rating for companies is the
next lowest after “D” and indicates “substantial risks.”
The ratings of the top three credit
rating agencies – Moody’s Investor’s Service, Fitch and Standard and Poor’s –
are highly influential in shaping Ukraine’s investment image, giving investors
an idea of how safe it is to invest in the country.
The city of Kyiv agreed with its
creditors to restructure a $300 million bond that matures in 2016, along with
60 percent of a $250 million bond that has been in default since November,
Moody’s notes. “In total, around half of Kyiv’s direct debt is being
restructured.”
Moody’s said that it would
automatically withdraw the negative rating of Kyiv’s $300 million Eurobond
after the restructuring is completed and the bond no longer exists.
The refinancing of all of Kyiv’s hard
currency bonds would significantly ease pressure on the city’s finances,
Moody’s wrote, while noting that many risks still remain.
“The successful restructuring of all
of the city’s foreign-currency-denominated debt, which significantly eases
Kyiv’s refinancing pressure, is likely to result in a rating upgrade for its
issuer and debt ratings.”
Ukrainian Economy Minister Aivaras
Abromavicius repeatedly stated in recent months that Ukraine’s darkest
financial days are over and that 2016 will be a year of positive growth for the
country.
But Ukraine’s economic stability is
now threatened by parliament’s failure to support the finance ministry’s tax
reform proposals, which could undermine further IMF and Western lending to
Ukraine.
