The reduction of the long-term sovereign credit rating and issuer rating in foreign currency of Ukraine from CCC to CC is not a sensation. The head of the Tax Committee of the Russian Federation, Danilo Getmantsev, wrote about this in his telegram channel.
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No sensation
According to the agency’s scale, the rating was reduced to the category “the issuer’s default has not yet occurred, but is almost inevitable.”
“Actually, there is no sensation here. Ukraine (Ministry of Finance) is preparing to continue the restructuring of commercial external public debt (to the owners of Eurobonds, GDP warrants), negotiations on which should be completed by August 2024,” Getmantsev noted.
According to him, according to According to the criteria of rating agencies, restructuring operations (deferred payments) fall under agreements on the exchange of problem debt, therefore the definition of default is applied to them.
Read: S&P downgraded Ukraine's rating in foreign currency and predicts default on external debt
A decline is inevitable
“Accordingly, on the eve of negotiations, rating agencies will begin to reduce Ukraine’s sovereign credit rating and our foreign currency ratings to the last pre-default level, which is what S&P was the first to do. In the near future, it will be followed by other agencies (Fitch, Moody's).
In anticipation of agreements or in fact of agreements, the ratings will be reduced to the level of selective/limited default. The same situation was in 2022, when the first restructuring of external commercial public debt was carried out.
After the legal completion of the exchange procedure and the entry into force of new conditions regarding the restructured issues, we can expect a certain increase in the sovereign credit rating of Ukraine and the rating in foreign currency,” explained the head of the Tax Committee.
According to him, this is the basic scenario, supported by the EFF program with the IMF.
Recall
According to this scenario, in December, Ukraine carried out a successful debt restructuring, recording a deferment in servicing and repaying external public debt to the G-7 countries and the Paris Club until March 2027. Debt restructuring to external commercial creditors is also included in the EFF program umbrella.
Therefore, it is highly likely that it will also be achieved. However, it is too early to talk about the terms of the restructuring, because it requires the consent of at least 75 % of owners of the relevant securities Any speculation about debt restructuring at this stage is pure speculation.
- Economy
