Fitch upgrades Ukraine rating to B-

Fitch Ratings upgraded Ukraine’s credit rating to B- from CCC on easing external financing pressure, the rating agency reported on Nov. 11. It highlighted that Ukraine’s official debt repayment remains manageable and repayment of private debt resumes only in 2019. The country’s international reserves rose USD 2 bln in 10M16 (on receiving an IMF loan and U.S. guarantees for a bond placement) and its economic stability has improved. At the same time, Fitch noted that the country’s government debt remains high (74% of GDP in 2016, excluding guarantees) and political risks remain significant. 

Alexander Paraschiy: With this upgrade, Ukraine is rated by Fitch now better than Greece and Venezuela and on par with Belarus, but still below Ghana, Pakistan, Argentina and Egypt. We agree with this ranking of Ukraine, taking into account the country’s key risk, which is the need to further increase state debt in the coming 2-4 years. We hope this rating action will at least interrupt the streak of negative sessions for Ukrainian Eurobonds (UKRAIN), which have lost 4.3%-6.6% of their value since the results of the U.S. presidential elections.

We also expect Ukraine’s upgrade will result in Fitch’s soon upgrade of corporate Eurobonds from throughout the country that are limited by the sovereign ceiling, including MHP (MHPSA), Ukrainian Railway (RAILUA), Oschadbank (OSCAHD), Ukreximbank (EXIMUK) and possibly Ferrexpo (FXPOLN).