Fitch upgrades Naftogaz rating to sovereign level of B

Fitch Ratings reported on Sept. 13 that it has
upgraded issuer default rating of Naftogaz (NAFTO) to B (from B-) with a
Positive outlook. The upgrade mirrors the same rating improvement for the
Ukrainian government a week before, the agency
pointed out. “Fitch equalises Naftogaz’s ratings with those of sovereign,
reflecting the company’s strong links with the sovereign and our assessment of
the company’s standalone credit profile at ‘b-‘,” its press release said.
Due to this close link, Fitch said it will be ready to further upgrade
Naftogaz’s rating in line with future sovereign upgrades, even if Naftogaz’s
standalone credit profile would be up to three notches weaker.

Alexander Paraschiy: We agree with Fitch’s conclusions that Naftogaz is tightly linked to
the state as it is participating in government social programs (of supplying
natural gas to households at regulated rates) and is paying large dividends to
the government, while the government historically was ready to support the
company with capital contributions, if needed. Given this link, there should be
no difference between Naftogaz bonds and sovereign bonds, as they bear the same
default risk.