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Moodys upgrades Ukraine sovereign rating to Caa3, outlook stable

November 23/2015

MOSCOW (MRC) -- Moody's Investors Service has today upgraded Ukraine's government issuer rating to Caa3 from Ca, said the agency.

The rating outlook was changed to stable from negative. The nine new bonds created in Ukraine's debt exchange operation were rated Caa3, and the ratings of the 13 bonds they replaced -- including the three bonds issued by a government-guaranteed entity called Financing of Infrastructural Projects (Fininpro) in 2011 -- were withdrawn. The issuer rating of Fininpro was also raised to Caa3 from Ca, in line with the government's rating.

The decision to upgrade the sovereign rating of Ukraine's government to Caa3 is based on the following key drivers:

1. Settlement of the restructuring of USD15 billion in privately-held Eurobonds issued or guaranteed by the government, which eases Ukraine's debt-service requirements and strengthens the country's external liquidity; and

2. Progress in political and economic reform under the auspices of the IMF-led programme, supporting a rebalancing of the economy and a meaningful reduction in public and external financial deficits.

Moody's decision to assign a stable outlook on the government's Caa3 issuer rating reflects the current balance of risks, taking into account both the stronger external position -- including an easing of debt service requirements in the coming years -- and continuing multilateral/bilateral financial support, against a still highly fragile political and economic situation. Also, increased compliance with the Minsk Peace Protocol since September appears to have diminished the risk of a renewed escalation of the military conflict in the eastern regions of the country.

The rating agency adds however that implementation risks under the IMF Extended Fund Facility (EFF), which is the fundamental framework behind the roughly USD25 billion in official financial support being provided to Ukraine, remain significant given the challenging environment and are therefore an important constraint on the rating.

Concurrently, Moody's affirmed the Ca rating of the government's USD3 billion bond scheduled to mature on 20 December, 2015. The bond was not part of the debt exchange and therefore entails a higher level of risk than the new bonds just issued because Ukrainian officials have stated that this bond will not be paid on the due date.

As MRC informed earlier, in March 2015, Moody's Investors Service downgraded Ukraine's long-term issuer and government debt ratings to Ca from Caa3.
Author:Anna Larionova
Category:General News
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