Fitch upgrades Ukrainian Railways rating following sovereign upgrade

Fitch Ratings reported on Sept. 12 that is had
upgraded the issuer default rating for Ukrainian Railways (RAILUA) to “B” from
“B-“, with a positive rating outlook. With this action, Fitch equalizes
Ukrainian Railways’ rating to Ukraine’s sovereign rating, which was upgraded last week.
The rating agency believes such equalization for the government-controlled
company makes sense. Fitch also highlights the company’s risks related to
“revenue defensibility” which is strongly linked to Ukraine’s macro situation
and global commodity risks. It also mentioned Ukrainian Railways’ recent placement of USD 500 mln bond
as a factor that materially eases the company’s refinancing pressure for
2H19-2021.

Alexander Paraschiy: The rating
action is what we expected after the sovereign upgrade. We expect the ratings
of other Ukrainian state-controlled issuers to also be upgraded by Fitch to the
sovereign level soon (including Oschadbank, Ukreximbank and Naftogaz).

Recall, Fitch has already upgraded the rating of MHP
(MHPSA) to keep it one notch above the sovereign level.

Regarding the two corporate Eurobond issuers which
recently enjoyed a Fitch rating two notches above the sovereign, we see a
chance that the rating of Metinvest (METINV) could be upgraded further (to
“BB-“), while Kernel’s rating will most likely remain unchanged (“B+”, now one
notch above sovereign).