As the agency explained, the upgrade follows the execution of consent solicitation on 11 August to restructure external debt.
“Near USD6 billion of principal and interest on Ukraine's Eurobonds has been deferred by 24 months, alleviating external debt servicing pressure, in the context of weakening international reserves and acute war-related spending needs. The restructuring received the consent of 75% of bondholders (by aggregate principal amount), above the 66.7% minimum required,” reads the press release.
Despite this debt servicing relief, the 'CC' rating reflects unresolved debt sustainability risks resulting from Russia's attack, the analysts note.
“We expect the war to extend well into 2023, driving public debt above 100% of GDP, adding to the already huge costs to infrastructure and economic output, and fuelling inflationary and external pressures, while deficit financing sources remain uncertain. A broader restructuring of the government's commercial debt is therefore probable in our view, although the timing is uncertain,” Fitch says.
As reported, international rating agencies S&P and Fitch lowered Ukraine's Long-Term Foreign-Currency Issuer Default Rating at the end of last week. In particular, Fitch downgraded the country's rating from C to RD as it considered the deferral of external debt repayments to be the completion of a distressed debt exchange.