Tuesday, March 31, 2015

Fitch Downgrades Ukreximbank to 'C'

Fitch Ratings has downgraded JSC The State Export-Import Bank of Ukraine's (Ukreximbank) Long-term foreign currency Issuer Default Rating (IDR) and senior debt rating to 'C' from 'CC'. The bank's other ratings are unaffected by these rating actions.

KEY RATING DRIVERS 
The downgrade reflects Fitch's view that default by the bank on its external debt obligations is now inevitable. This follows the public announcement by the bank on 27 March 2015 on initiation of talks with the holders of its USD750m eurobond notes to extend the notes' maturity from 27 April 2015 to 27 July 2015. This short-term extension is necessary to "negotiate a long-term solution with the noteholders in accordance with the targets established in the four-year USD17.5bn extended fund facility for Ukraine approved by the IMF on 11 March 2015".

Apart from the USD750m eurobond due on 27 April 2015, Ukreximbank has a USD600m senior eurobond due in January 2018 and a USD125m subordinated bond due in February 2016. Fitch expects these bonds to also be the subject of negotiations with creditors.

RATING SENSITIVITIES 
Fitch expects to downgrade Ukrexim's Long-term foreign-currency IDR to 'RD' (Restricted Default) if the bank does not repay its outstanding eurobond on 27 April. The ratings of the three outstanding bonds are now all at the lowest possible levels for instrument ratings, and so would not be subject to further downgrades in case of a restructuring.


The rating actions are as follows:
Ukreximbank:
Long-term foreign currency IDR: downgraded to 'C' from 'CC' 
Senior unsecured debt of Biz Finance PLC: downgraded to 'C' from 'CC, Recovery Rating 'RR4' 
Long-term local currency IDR: 'CCC', unaffected
Subordinated debt: 'C'/Recovery Rating 'RR5', unaffected
Short-term foreign currency IDR: 'C', unaffected
Support Rating: '5', unaffected
Support Rating Floor: 'No Floor', unaffected
Viability Rating: 'ccc', unaffected 
National Long-term rating: 'AA-(ukr)'; Outlook Stable, unaffected


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