Daily Management Review

Ukraine Nearing Bankruptcy says Analysts as Fitch Downgrades Credit Rating to ‘D’


11/12/2015




Ukraine Nearing Bankruptcy says Analysts as Fitch Downgrades Credit Rating to ‘D’
The credit rating for Ukraine was further reduced on Thursday by credit rating agency Fitch Ratings to D from Triple C.
 
This credit rating essentially translates into the statement that it was now eminent that Kyiv would default on some of its foreign debt.
 
Templeton Asset Management, a major global fund manager, holds billions of Ukrainian bonds while it is unclear who owns Kyiv debt.
 
D is considered to be the default credit rating and analysts are certain that it is most unlikely Ukraine will be paying back the foreign debts. However the national sovereign debt still holds a CCC rating
 
The downgrading of the credit ratings is testimony of the fact that following two years of political crisis, the economy of the country has become very fragile and the economic situation in the country is near a collapse.
 
Last Friday, the country faulted in paying back $250 million in eurobonds. On November 6, 2015, Kyiv had announced the introduction of a temporary moratorium on debt. Analysts are of the view that another payment of $300 million that the country is scheduled to pay would be defaulted.
 
One of the major problems for Ukraine in recent times was its failure to convince Russia to restructure a $3 billion loan. Since the ousting of the Ukraine friendly Russian leader Viktor Yanukovych in 2014 followed by the subsequent secession of Crimea which is now part of Russia, the two former political and cultural allies have parted ways.
 
Ukraine also failed to repay a $500 million payment for its sovereign which was due on September 23 this year. This has made Fitch term the sovereign debt as “restricted default”.
 
A failure to pay on a bond, loan or other material financial obligation without entering bankruptcy or ceasing operations is termed as a ‘restrictive default’.
 
While currently surviving on the European and IMF bailout packages, the Ukraine’s currency, the hryvnia, is down 30.9% year-to-date.
 
Meanwhile, while Fitch downgraded Ukraine’s credit rating, Russia, the biggest creditor to the Ukraine reiterated on Thursday that Ukraine must pay its $3 billion debt to Russia or file for bankruptcy.

“Russia’s position has not changed,” Russian presidential spokesman Dmitry Peskov said.

While threatening to approach the international courts, Dmitry Peskov added that Russia has no intention to restructure Ukraine’s debt in response to the ultimatum given on Thursday by the government of Kiev. Ukraine had urged Russia to restructure the debt.
 
Russia expected the debt to be paid in full by December and both Russian President Vladimir Putin and Finance Minister, Anton Siluanov, have repeatedly said that Moscow is not willing to discuss the restructuring of the Ukrainian debt, Dmitry Peskov said.
 
Dmitry Peskov made it clear that Russia would follow the course of action that is taken for suspension of payments, when he was asked whether or not Russia is ready to turn to international courts to defend its interests.
 
(Source:www.forbes.com, & www.laht.com) 






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