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Concorde Capital Research: Moody’s upgrades Ukraine sovereign rating to Caa2 with positive outlook

August 28, 2017 | Cbonds

Moody's Investors Service announced on Aug. 25 it has upgraded the Ukrainian government's credit rating to Caa2 from Caa3 and its rating outlook to positive from stable. It also raised the country’s ceiling for foreign currency bonds rating to Caa1.

In its rating action, Moody’s referred to 1) “impact of reforms” in the natural gas and banking sectors, public procurement system and taxation and 2) “significant strengthening of Ukraine's external position,” namely an increase in Ukraine’s gross international reserves to USD 17.8 bln as of end-July from USD 5 bln in early 2015, mostly the result of IMF loans and other multilateral lenders.

Moody's attributed its positive outlook to “the momentum of reforms that, if sustained, could lead to further improvements in Ukraine's public and external debt sustainability.”

Moody’s also highlighted that Ukraine still has a risk of servicing external debt, with a significant repayment burden in 2019-2021 that “will require additional foreign currency funding beyond what official lenders are likely to provide.” It also warned on the risks from the war in Donbas, as well as the uncertainty that can come from parliamentary and presidential elections scheduled for 2019, which add risks to “ongoing compliance with the IMF program.”

Alexander Paraschiy: This is positive news for the Ukrainian government, which was awarded for its reform efforts in selected areas. But this will change little for Ukraine’s sovereign risk as Moody’s Ukraine ratings still remain two notches below the marks of two other top agencies, Fitch and S&P, which rank Ukraine at B-. Moreover, Moody’s made it clear that Ukraine can only count on its Caa1 rating in the near future, even with it being far below investable ratings.

The recent revision will most likely lead to upgraded ratings of state banks Oschadbank (OSCHAD) and Ukreximbank (EXIMUK) to Caa2. It may also result in an upgrade of Ferrexpo's (FXPOLN) rating to Caa1 soon.

Company: Concorde Capital

Full company nameConcorde Capital
Country of riskUkraine
IndustryFinancial institutions


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